The Capital Market And The Challenges Of Real Sector Financing In Nigeria.
[A STUDY OF THE PERIOD 2000-2009]

2.6.3 STOCK BROKING HOUSES/BROKERS

This consist of individuals, firms or companies licensed by the council of the exchange to deal in stocks, shares and other securities quoted on the exchange on behalf of their customers. Brokers are people who buy and sell securities on behalf of investors for a commission called brokerage fee. The Nigeria Stock Exchange operates a dual capacity dealing system and hence, brokers also perform as jobber.

Functions of Stock Broking Houses/Brokers

1. He acts as an investment adviser in securities

2. They provide liquidity for the stock market by acting as agent in the buying and selling of securities.

3. They package securities for listing and quotation on the Stock Exchange.

2.6.4 THE REGISTRARS

These are corporate bodies licensed by SEC to undertake the services of keeping official records of securities, manage the issue and disbursement of share certificates as well as dividends to individual shareholders including legal transfer of ownership of shares in the company register of shareholders. 

2.6.5 SECOND-TIER SECURITY MARKET (SSM)

As a result of the stringent listing requirements on the security market, only very large companies succeed in getting listed. While, small and medium scale enterprises (SMEs) could not scale the conditions and thus failed to be listed. Thus, these groups of firms were denied the advantages offered by the capital market especially the raising of funds necessary for expansion and modernization of their operations. To create opportunity for these firms the Second Tier Security Market was established in April 1985. Investor in securities in this market enjoys the same benefit and protection as in the main market. The first company to be listed here is Julie Pharmacy; other companies in the market are Cutix Plc, Advswitch Plc etc.
Listing Requirements in the SSM

(i) Company must be registered as a public company
(ii) It must submit financial statement for the past three years of its operation to the exchange.
(iii) Last audited account must not be more than nine months
(iv) Amount to be raised must not exceed N10 Million
(v) Fixed annual quotation fee
(vi) The offer must be at least 10% of the nominal value of the firms share capital or N100,000.00 must be offered to the public
(vii) On listing, firm must submit half yearly and annual accounts to the exchange
(viii) Unalloted securities must be sold on the floor of the Nigeria Stock Exchange.

2.7 LEGISLATIVE AND REGULATORY FRAMEWORK OF THE NIGERIAN CAPITAL MARKET

The following institutional regulatory framework has been put in place to regulate the activities of the Nigerian Capital Market;
(i) Federal Ministry of Finance
(ii) Securities and Exchange Commission (SEC)
(iii) Nigerian Stock Exchange (NSE)
(iv) Central Bank of Nigeria (CBN)
(v) Debt Management Office (DMO)

On the legislative area, the following laws govern the operation of the capital market and its institutions;

I. The Investment and Securities Act 1999
II. Company and Allied Matters Act 1990
III. The Nigerian Stock Exchange Act
IV. Lagos Stock Exchange Act
V. Securities and Exchange Commission Act 1979
VI. Privatization and Communication Act
VII. Nigerian Investment Promotion Act
VIII. The Abuja Commodity Exchange Act
IX. Trust and Investment Act 1962
X. Code of Ethics Professionalism in the Banking and Finance
XI. International Securities Act (ISA)
XII. Debt Management Office Act
XIII. Corporate Affairs Commission Act
The above laws guide and regulate the behaviour and activities of capital market operators and participating institutions.

2.8 CAPITAL MARKET REFORMS The capital market’s capacity to contribute to the development of the economy has been largely impaired by various inadequacies. The market over the years has been characterized by: 

• Lack of depth
• Poor Liquidity
• Inadequate infrastructures for secondary market operations
• Basically an equity market, with the largely dormant bond market
• High transaction costs
• Lack of sophisticated products instruments. The market is mainly dominated by traditional instruments such as bonds and equities with limited derivatives.
• Unfavourable tax regime
• Evolving legal/regulatory environment
• Unstable macro-economic environment. As a result of the above, the market was therefore not in the best position to contribute maximally to financing the real sector and facilitating fast economic growth. These inadequacies have made the reforms that have taken place over the years imperative.

Highlights of Recent Reforms in the Capital Market To a large extent, the recent reforms of the capital market started with the enactment of the Investment and Securities Act (ISA) No45 of 1999 which replaced the SEC decree of 1988. The ISA enlarged the powers and functions of the Securities and Exchange Commission for the attainment of a more efficient and virile capital market that would meet the needs of the economy. The Act provides that the Commission, among other functions, shall

• Regulate investment and securities business in Nigeria;
• Register and regulate Securities Exchanges, Capital Trade Points, Futures, Options and Derivative Exchanges, Commodity Exchanges and any other Recognized Investment Exchanges;
• Register securities to be offered for subscription or sale to the public;
• Render assistance in all aspects including funding as may be deemed necessary for promoters and investors wishing to establish Securities Exchanges and Capital Trade points;