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THE ROLE OF
STOKE BROKERS IN THE ECONOMIC DEVELOPMENT OF NIGERIA
INTRODUCTION
In any
economy there is a financial systemÂ
that is responsible for regulatingÂ
the financial environment of the society determining the types and use of funds to be issued, source of
funds to be put. The financial system is really made up of two major markets, namely money and
capital stock market. The many market is the market for short term funds and
securities including treasury bills, treasury certificate negligence of
deposits, commercial paper and other funds of  which are less than a year duration.
Thus
the aim of the regulating bodies
composed of Nigerian stock exchange
commission (SEC) is to promote development ofÂ
orderly capital market to have
authority over its members (stock broking firms) to whom it set rules of ethics are made to guide their professional behaviour in the course of
carrying out its functions and create
awareness of the general public. Stocks exist to enable companies in need of long
term financing to sell pieces of the business stock equity securities in exchange
for cash. This is the principal method of raising business capital other
than issuing bonds. When the stocks of
these corporations, which all which corporations must issue, are owned by the public at large,
including both private investors and institutions, they are said to be publicly
held. These publicly held shares can be easily traded (sold) to other investors
in the stock market and are thus said to be liquid, orÂ
readily conversed to cash. Stock breakage firms usually, serve as intermediaries
in the transactions, buying the new securities at wholesale prices from the
issuer and then reselling them to the
investing public at retail prices
1.1Â Â Â
 HISTORICAL DEVELOPMENT OF CASE STUDYÂ
 IN NIGERIA STOCK EXCHANGE
The dealing
members of the Nigeria stock exchange are institutions who are licensed by the exchange as stockbrokers to buy
and sell securities quoted on the exchange on behalf of the investing public.
In 1960,
Nigeria stock Exchange was established with branch in Kaduna in 1978. Prior to the establishment
of the Nigeria stock exchange the were not equipped enough with the information
of stock broking and its importance to an individual, groups, organizations and
global economic development.
In essence
the awareness was low but from 1936 to
date a considerable number of stock broking firms sprang up in Nigeria and
in Kaduna particularly the first stock
broking firm served as an eye opener to
investors and the potential ones, with a highly experienced board and a crop of
seasoned and  dedicated professionals positioned to tackle the
challenges of this new millennium. The branch is situated in Kaduna to exploit the immense untapped
natural resources and economic potentials of the country in general.
There are
today 226 dealing members of the
Nigeria stock exchange. Many of them are affiliates of bank and other
reportable financials institutions. Dealing members of  Nigeria stock exchange can now accommodate foreign shareholders in
their equity capital or go into any form of partnership with foreign stock
brokerage firms.
Application
from foreign stock brokers as members of theÂ
 nigeran stock exchange can now
be enter anted within the rules and regulations of the inorganic stock
exhcnage, as well as registration with
securities and exchange commission and
corporate afiars commission following the abrogation of the exchange control
Act 1962 and Nigeria promotion Decree ofÂ
1982 as stated in the Nigerian stock exchange fact exchange book 2004
page 334.
Finally,
the existence of stock broking firms as members ofÂ
Nigeria stock exchange has helped to create a wealthy tomorrow for clients and
increase the wealth of shareholders and
job creation for the unemployed.
1.2Â Â Â
 STATEMENT OF PROBLEM.
Capital
market are generally expected to produce the institutional arrangement through
which funds from the surplus sector of the economy. The allocation of funds are
mainly for industrial, commercial and agricultural development. The capital
market growth rate is very slow and not
developing to meet the international standard. There is lack of awareness on
the part of the public and potential investors.
Poor
management for the operation and affairs of a business is one the major
factors leading to incompetence,
inefficiency and dishonesty in managing organization in Nigeria and in the
global which has not been in the best
interest of the shareholders and the general public. However, the need in
that over-centralization of the
stock exchange which might not bring
the benefit of market operation nearer to a greater section of the
country’s citizenry and this will not enhance the particularly of the
market function.
Dishonesty
from both the stock broking firms and the investors are among the
general problems facing stock shares investment in the country and the world at large.
However, the need in that of overÂ
centralization of stock exchange which might not bring the benefit of
market operation nearer to a greaterÂ
section of the country citizenry and this will not enhance the
performance of the market functions.
1.3Â Â Â
 HYPOTHESIS TESTED
Hypothesis
is a tentative proposition suggested as a solution to a problem or an
explanation of phenomenon. It is also a set of generalized statement concerning
the problem under study.
The
formulation of which led to the structuring of questionnaires to
assess the validity of the hypothesis by sampling various of stock brokers and
customers of firms in Kaduna stockÂ
exchange.
The
hypothesis is given below (1) Ho that there are inefficient stock marketing
services  from stock broking firms to
the development of a meaningful economy (2) Hi that there are efficient stock marketing services from stock
broking firms to the development of a meaningful economy.
1.4Â Â Â
 AIMS AND OBJECTIVES OF THE STUDY
The aim of
this research is to undertake incentive investigation and to highlight the role
stock broking firms have played in the development of Nigerian economy. To
determine whether or not there are lapses in their contributions to the economy
growth, however, in the event of any lapses suggestion which be made. The
primary objectives of the research are to a basis for contribution to the
development of Nigerian economy. And to provide a material for further studies.
1.5Â Â Â
 SIGNIFICANCE OF THE STUDY
The
significance of this study less in the benefit that the findings would provide
to any individual group and organizations. Considering the importance  of capital markets in the development of the
Nigerian economy and the role of stockÂ
broking firms and both the Nigerian stock exchange commission in regulation the
operational activities in the market, this research, this research work is
intended to bring to line light the
contribution of the bodies to assist
the capital markets for it to achieve the desire optimum results. Also this
study is in practical fulfillment for
the award of diploma in accountancy.
1.6Â Â Â
 SCOPE AND LIMITATIONS OF THE STUDY
Due to
financial constraints and limited time
at the researchers disposal, the researcher should limit this study in the
following areas.
Buying and selling of shares
Portfolio management
The regulatory bodies i.e. Nigerian stock
exchange and securities and exchange commission.
The functions of stock broking firms
1.7Â Â Â
 DEFINITIONS OF TERMS
Securities:
these are stock and share that areÂ
traded in stock exhcnage market.
Portfolio:
The adimixture of shares and bonds laid
by an individual or institutions.
Regulation:
Transaction on the exchange are regulated by the Nigerian stock exchange as a
self regulatory organization (SRO), and the securities and exchange commission
(SEC) which administers the investment and securities Act 1999.Â
Pricing:
prices of new issues are determines by issuing houses/stock brokers which on
the secondary market prices are made stock broker only.
Intermediaries:
the intermediaries are the financial institutions and dealers that facilitates the borrowing and  lending ofÂ
short term money.
Bond:
Government stick/bonds are long dated loans stocks, issued by the federal
government of Nigeria and state governments, the federal government e.g.
treasury bill are usually regarded as gilt-edge securities with no attendant
risks. Because of the superior risk rating, their yields are usually lower than
other similar securities.
Preference
Stock: Stock on which dividend payment
must be made before profits are distributed to holders of ordinary stock.
Dividend:
Payment of share of profit, toÂ
shareholders in a business company, orÂ
assets to creditors (e.g. of an investment company) or to
a policy holder in a mutualÂ
insurance company, to pa a dividend of 10 percent, dividend warrant, order on a bank to pay a dividend.
Bonus: An
extra dividend to stock holders of a shareholders.
Brokerage:
Brokers commission for services.
Equity
stock: ordinary stocks and shares not bearing fixed interest.
Capital
gains: when a stock is purchased at a given price. Then subsequently at a
higher price, the resultant profit is known as a capital gain.
Speculative
activity: trying for such “buy low, Sell high†profits over a short time
span known as short term trading.
Long term:
When stocks that have been held for more than a year are sold at a profit
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