THE ROLE OF NIGERIA CAPITAL MARKET IN THE GROWTH OF INDUSTRIAL SECTOR

CHAPTER ONE

1.0  INTRODUCTION

       The Nigeria capital market has always played a significant role in the economic growth and development of the nation. In time of economic boom, it assisted in the provision of finances for expansion, retooling and establishment of production facilities. Also in current period of recession it has been providing finance for maintaining existing facilities diversification and acquisition.

       The capital market spearheads the ongoing prudential structural adjustment of our nation economy which will call for huge financial commitment of a reasonable proportion of the financial need. Under this structural adjustment of our national economy which will call for huge financial commitment of a reasonable proportion of the financial need. Under this structure re-arrangement will certainly be mate through the assistance of the Nigeria capital market.

       A said feature of the Nigeria economic landscape is the large number of the industrial projects of the federal and state government as well as the compelling of an unequipped private sector to as some greater responsibilities in the economy in order to whom it may concern reduced the domineering status of foreign bodies.

       The oil boom of the 1970’s made it possible for government to embark on the various industrial projects.

       However, the none completion or under utilization in case where some of them are fully executed of these projects amount to a waste of scare service resources, under the government of industrialization programme consideration are given to the small and medium scale enterprises (SME) which form the centre of the industrial development of the country.

       Unfortunately, the SME’s are only leaving in the shadows of large business for so long hence, there importance as roots to the economic health of a nation have been forgotten. The problems of SME’s ranges from policies which have been constituents by the authority guiding them to the problems of foreign products as well as the problems of the Finances for the formations and sustenance of SME’s

BACKGROUND OF THE STUDY

       Level Brothers Nigeria Plc Rc 113 is one of the oldest manufacturing outfit in Nigeria. The Company was established in 1923, to manufacture soaps using local palm oil. Over the years, the company diversified and expands its operation of toilet soaps non soapy detergents, tools and personal products including toothpaste and hair products.

       The company has strengthened its hold in foods and personal products. Through merger with Lipton Nigeria limited in 1985, with cheeses brought products international in 1988 and latterly 1995 with Unilever Nigeria Limited which effectively transferred to LBN its stewards business.

       The company has built a large palm kernel mill at its ABA factory to improve the supply to vegetable oil and essential raw materials in soap production LBN is also making investment in oil palm production in order to improve. The company hold 25% of the share in Okitipupa oil pam company Plc.

       The company’s product are distributed and sold at uniform prices over the country through its established and tested distribution network using appointed officers. Lever Bother is one the quoted and capitalised companies in the stock exchange and its share price is currently about N25 in the stock market.

1.1  STATEMENT OF PROBLEMS

       The Nigerian industrial sector in spite of the great potential failed to achieve the greater aim of converting Nigeria into industrialised country.

       Onlike (1994:7) stated that there is apathy of our indigenous companies to see quotation on the stock exchange. Second – tier security market was established to remove the obstacles that militate against the indigenous companies seeking quotation and to provide wider and cheaper long term source of financing for small and medium scale indigenous companies. In spite of this, of indigenous companies shy away from the stock market.

       Some causes of this are the requirement of the stock exchange as has been developed over the years. Based on the above analysis, this question arise why do our industrialist shy away from the capital market in spite of its numerous benefits?

       Do our industrialist lose their enterprises by quotations on the capital market?

       Are the disadvantages of the capital market out weighing the advantage?

       This research work seeks to answer these questions.

1.2  NEED FOR THE STUDY

       The study “the role of the Nigerian capital market in the growth of the industrial sector” is designed for us to understand and appreciate the importance and functions of the capital market in shaping work done this topic by various researchers and analysts.

       The study and research thereby is necessary because:

a.          It tries to find new ways and methods of applying the capital market concept so to industrial sector.

b.          Government and the enterprises would take advantage of the suggestion and recommendations from the study market results oriented industrial policies.

1.3  OBJECTIVE OF THE STUDY

       As we have ascribed the role of Nigerian capital market in the industrialization of a country, the study is aimed at:

i.            To examine the activities of the Nigerian capital market and the direct impact it had on the Nigerian industrial sector.

ii.           To know the problems and prospects of Nigerian capital market in financing and sustaining industrial enterprise.

1.4  RESEARCH QUESTIONS

a.    Does capital market mobilize long term finance for the development of industrial sector?

b.    How resilient and to what extent has capital market encourage business and industrial expansion for economic growth and development?

c.    What role does the capital market play in revamping the economy?

1.5  SCOPE OF THE STUDY

       This study will as much as possible assess the Nigeria capital market, it’s roles and activity in the economy the institutional operators of the Nigeria capital market and their functions.

       Also, it will outline the pertinent factors hindering the activities of the Nigeria capital market and possible solution to the problems by taken data that cover period of five (7) years will be able to achieve the set objectives of this work. The choice of the period from 2001 – 2007 quickly calls to mind the industrial situation of the country.

1.6  ASSUMPTIONS OF THE STUDY

       The study, “the role of Nigeria capital market in the growth of the industrial sector” is designing for its to understand the important and function of the capital market concept so as to improve the performance of capital market.

       The research is therefore assumed that:

It will encourage the researchers academics and analysis on the need for the research work and more studies on this issue.    

1.7  LIMITATIONS OF THE STUDY

       The problems encountered in the course of the study include:

1.          Time: Due to the hectic academic schedule of the research, the researcher was unable to visit more stock market operations entrepreneur to get a wider view for the study.

2.          Finance: This is the major constraint the researcher encountered which limited his transportation as well as the size of the sample used.

1.8  DEFINITION OF TERMS

       In the course of carrying out the study for clarification purposes, it becomes imperative to defined certain terms used in the study which may not be easily understand.

Capital Market: This is a market in which financial and sold.

Stock: This refers to the certification ownership in a company. It is the right of ownership in the company. The stockholder has right to attend meeting of the company.

Bond: This is a loan stock of fixed nature for development purposes.

Share: This is a part of the stock which gives you the right to a percentage of the company’s profit every year.

SME: This refers to enterprises whose total cost (excluding land) is above (N1 m) one million but not exceeding (10 m) ten million.

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