Understanding the Capital Market

The Capital market is a market for buying and selling medium to long-term securities (i.e. ordinary shares, preference shares, bonds and debentures). The capital market also provides for direct investments in securities through products offered by Collective Investment Schemes (CIS). For businesses and governments to do well and prosper, they require stable source of long term funds which is not available in the money market (the banking system). For instance, businesses need to expand their factories to remain competitive, and governments need to provide such socio-economic infrastructures such as roads, rails, hospitals, schools, bridges etc to be relevant. Only a vibrant capital market can provide this type of long term funding.

The Nigerian capital market is an integral part of the Nigerian financial system. Other sectors of the financial system include the money market, the insurance market and the pensions. Each of these markets has a statutory regulatory institution empowered by statutes (laws) to regulate and supervise them namely: Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC), National Insurance Commission (NAICOM) and Pension Commission (PENCOM) for the money, capital, insurance and pension markets respectivelyNigeriaFinancialSystem

Brief History of the Nigerian Capital Market
Capital market activities in Nigeria can be said to have commenced in 1946 with the issuance of the first development stock of £300,000 (three hundred thousand pounds sterling) by the then Colonial Administration. This took place even before the Central Bank of Nigeria (CBN) was established in 1958. The CBN and the Ministry of Finance later facilitated the establishment of the SEC and the other institutions of the Nigerian capital market.

The Nigerian Stock Exchange came into being in 1960 as the Lagos Stock Exchange but started trading in 1961 with three equities, six Federal Government bonds and ten Industrial Loan making a total of nineteen listed stocks. It later changed its name and became the Nigerian Stock Exchange (NSE) in 1977. There are now over 200 securities listed on the NSE and the trading system has improved from a manual call-over system to a screen based electronic trading system where traders transact business via the computer and from the comfort of their offices.
The Securities and Exchange Commission (SEC) which is the apex regulator of the Capital market began in 1962. It started as the Capital Issues Committee at the CBN and later became the Capital Issues Commission in 1973 when the Capital Issues Commission Act was enacted. The name Capital Issues Commission was later changed to the Securities and Exchange Commission (SEC) in 1980 following the promulgation in 1979 of SEC decree No. 71. The law has severally been amended and it is now called the Investments and Securities Act
(ISA) No. 29 of 2007.