1.1 Background to the Study
The Nigerian Stock Exchange (NSE) was established in 1960 as the Lagos Stock Exchange. In 1977, its name was changed from the Lagos Stock Exchange to the Nigerian Stock Exchange. As of June 28, 2016, it has about 180 listed companies with a total market capitalization of about N10.16 trillion. All listings are included in the Nigerian Stock Exchange All Shares index. In terms of market capitalization, the Nigerian Stock Exchange is the third largest stock exchange in Africa.
The stock exchange is a specialized market place for buying and selling of securities. By securities we mean shares, stocks, debentures and bonds. The stock exchange is an organized market where those intending to buy or sell stocks and shares meet to transact business. The stock exchange as a market is a place where businesses can raise capital to become bigger in terms of capital formation. It must however be noted that the stock exchange deals with the securities of existing establishments only.
The Nigerian Stock Exchange (NSE) was incorporated on September 15, 1960 as a company limited by guarantee and started operations in Lagos in 1961 as Lagos Stock Exchange. The stock exchange later changed its name to Nigerian Stock Exchange in December 1977 with a branch office in Kaduna and Port Harcourt in 1978 and 1980 respectively. At present, Nigerian Stock Exchange has operating branches in many centres in the federation. Other branches opened in Nigeria are Kano in 1980, Onitsha in February 1990, Ibadan in August 1990, Abuja in October 1990, Yola in April 2002, Benin - 2002, Uyo and Ilorin in 2002 while Abeokuta was opened in November, 2008. Each branch has a trading floor where activities of buying and selling of securities are carried out. The Lagos branch remained the headquarters. The government established Abuja Stock Exchange as an independent stock exchange following the implementation of Odife report on the Nigerian Capital Market. It was restructured to serve as a commodity exchange in its initial purpose to compete with Nigerian stock exchange. The Nigerian stock exchange started operation with only 9 securities (3 equities and 6 government stocks); it has now over 312 securities made up of government stocks, bonds, individual loan (debentures) preference stocks and equity/ordinary shares or companies all with a total market capitalization of over N12.62 trillion before dropping to a little over N7 trillion following a prolonged market meltdown (Idowu, 2008). Market capitalization is the aggregate market prices of a company's shares; it is the value of a firm as determined by the market price of its issued and outstanding common stocks.
1.2 Statement of the Problem
The Nigerian Stock Exchange market is faced with numerous problems which comprises of decreased trading activities where by persistent rise in the demand for securities without a corresponding increase in its supply. In this case, investments are not easily found for purchase. Given the number of years since the Nigerian Stock Exchange has been established and the substantial financial resources available in the country, coupled with the existing institutions one can claim that the entire spectrum of the capital market has not been sufficiently active, especially when compared with the capital unit of similar or lesser aged units in other developing countries. The factors responsible for this could be identified to include: