CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The capital market as a subsection of financial market, deals in long term and short term, as well as operating stock. It may not involve the issue of negotiation instrument but, cash flow from operators and direct negotiation or re-capitalization. These are done through organization such as:
Development Bank, NIDB, NBC THE Nigerian Stock Exchange The Issues Houses The Unit Trust which are largely the government owned and therefore, have their capital subscribed by government. It also involves Insurance Company which also have their capital issued subscribed direct also have owner i.e. government or private owned. They Rightly be called the market for direct negotiation long term (NDLF) that is the arm of capital market.
The other arm of capital market is the securities market that deal in the issue of sales of long term securities like the money market. Securities market involves the lending of money in one form or the other unlike the money market however, the securities trade in long term debt are bonds issue by the government on agency which when bought by individual or institution grants loan to what ever organization that issued it.
It is thus a promissory note or (100) whichever issue promissory to repay at certain date in the future and pay by the buyer as a guaranteed rate of interest. Among such bonds available in Nigeria capital market are:
The federation of Nigerian First Development Stock 1964, 1969 and 1979. Cooperate debenture stock: These are issued by the government whose stock are normally, quested on the stock exchange, are recent one being the CFAO often for subscription of N25 million 12% redeemed debenture stock.
The equities on the other hand are purchase share or stock issued by company or institutions by individual, group or financial intermediaries. The purchased of share or stock does not become a creditors as the case of bond or under bond issue, rather he became an owner of the company. The corporation promises nothing in return except through good business management, it increase its earning which allow the purchased (now an owner) to earn in dividends.
The equities on the other hands are purchased shares and stock issued by a company or institution by an individual. The equity can be in form of shares (offer for subscription) as the case was first issued in the Nigeria in February 1959 when the Nigeria Cement Company Limited. (Niger Cement) made a public offer of N100.00 N2 per value share at April, 1960.
The securities market can be newly issued securities board, or equities that primary segment of the capital market or in securities that have already been issued.