Documente Academic
Documente Profesional
Documente Cultură
INDUSTRIAL DEVELOPMENT
BY
CHIKEZIE NWACHI
BAM/H2003/322
AUGUST 2005
TITLE PAGE
BY
CHIKEZIE NWECHI
BAM/H2003/322
AUGUST 2005
ii
APPROVAL PAGE
This project work has been approved by the under singed behalf of the
department of business administration and management, school of business
study as a partial fulfillment for the award of a higher national diploma in
business administration and management (HND).
Sign --------------
Sign ---------------
Supervisor
Mr, G. Ojemba.
iii
DEDICATION
This project is dedicated to God Almighty who gave me this change and made
it possible for me to succeed. The almighty through
has been the source of my inspiration throughout my academic, pursuit and all
lovers of knowledge. Also for my mother, brothers and sister who sacrificed
almost every thing for me to be happy many thanks.
iv
ACKNOWLEDGEMENT
PROPOSAL
This project research study whose subject matter is on the role of Nigerian
stock exchange in industrial development is stated to be presented in the
normal fine chapter of a project work.
For a general insight and a fair understanding of the intended course of action
and various form of presentation evaluation and analysis of data collection
from successive interview questionnaires administration as well as other source
of data collection like news letters, security market journal and business times.
It is proposed to briefly run of short preview of the expected contents of each
chapter and preliminary pages of the enter work.
The work started with the preliminary page which include the title page
approval page, proposal, dedication, acknowledgment and table of content.
The first chapter which fellows the preliminary page starts with the general
introduction. This means paging attention to the exposure of the topic under
research. Therefore a background of the study and statement of problem will be
use to achieve this aim. Also the objective and significance of the study will be
revealed along side with hypothetical statement and research question. The
vi
chapter finally ends up with the disclosure of the scope and limitation of the
study.
Chapter two carries a general review of available relevant literature hence
books text book are the expected literature re-reviewed for general searching
and support of existing information about the stocks exchanges .
Chapter there covers the research design and methodology. Here the general
features of the research procedure, development of research material and
treatment of data will be given therefore the modes and series of tasks under
taken to ensure a successful research and data collection will form the basic
discussion under this chapter.
The preservation and analysis of data from the main subject matter of chapter
four the data collected therefore are presented analyzed and concluded upon.
The last chapter which is chapter fine will discuss the findings of the research
works. This will be followed by necessary conclusion and recommendation.
Also this project work will end with the information which includes definition
of terms. Bibliography, appendix and questionnaires.
Finally, therefore the research have decided to take up this study on the role of
Nigerian stock exchange in industrial development just because of her interest
on the benefit of the stock exchange and the effects it has on the industry
development.
vii
ABSTRACT
The Nigerian stock exchange (NSE) has been created to serve various function
such as often of business guideline to top business management concerning
cost of capital for the Nigerian stock exchange provides avenues for long term
investment. These function credited to the stock exchange is expected to create
positive effect on the general business and industrial growth of the country.
However, this research work is determined to evaluate the effect of the stock.
Exchange
carrying out the research work with the above aim in mind efforts will be made
to disclose relevant findings thus drawing necessary solutions and
recommendations to alleviate some anticipated problem on the Nigerian stock
exchange to be disclosed during the research work.
viii
TABLE OF CONTENTS
Title page
Approval page
Dedication
Acknowledgment
Proposal
Abstract
Table of content
CHAPTER ONE
1.0
Introduction
1.1
1.2
Statement of study
1.3
Objective of study
1.4
Research question
1.5
Hypothesis formulation
1.6
ix
1.7
1.8
Limitation of
1.9
Definition of term
1.10
Reference
CHAPTER TWO
2.0
Literature review
2.1
2.2
2.3
2.4
2.5
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.0
3.1
Research design
3.2
Area of study
3.3
3.4
3.5
3.6
Validation of instrument
3.7
3.8
3.9
3.10 Reference
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1
4.2
Testing of hypothesis
4.3
Summary of result.
xi
CHAPTER FIVE
DISCUSSION RECOMMENDATION AND CONCLUSION
5.1
5.2
Conclusion
5.3
Recommendation
5.4
5.5
Bibliography
5.6
Appendix.
xii
CHAPTER ONE
1.0
INTRODUCTION
1.1
Industrial growth forms the basis for industrial development is not only needed
for its ability to improve living standard. It also acts as a weapon for building
national strength and prestige. Therefore industrial development implies the
increase of industrial, expansion of quality and quality of output and the
institutionalization of industrial growth process. It also involve
technical
growth
and
development
and
the
prominence
given
to
xiii
xiv
who accounting to the classical economic theory has the greatest use for them
and who is the one that can obtain the profits which will serve as the investors
rewards. And it in when shares are valued in relation to the
expected
capitalized value of the firm that effective disciplinary advice which punishes
management whose operation are inefficient or unprofitable.
Therefore a reliable rate which results from investment in new factories,
machinery, equipment and material to increase the physical capital stock of the
nation. The stock exchange market plays an important role in propping up
financial capital and provision of market for quoted stock so as to chance the
fulfillment of these economic growth parameters. This investing so as to
actualize the economic growth.
xv
1.2
STATEMENT OF PROBLEM
The ignorance of the stock exchange has brought about how participation of
firm and individual engaging in the stock exchange and this has also limited
the availability of stocks and shares that could be traded on the stock market.
The stock market is faced with the problem of valley in delivering and
settlement of stock transaction.
For the fact that the number of quoted security is small and the total
capitalization is about 335 billion which is nothing when compared with some
companies abroad that have more than that amount of money as its capital is
not encouraging. And for the fact that the government is get to privatize most
of the companies in making the stock market not to have financial strength.
Also affecting the market is the fact that most of the operators ie the
issuing, the stock brokers auditors etc. are not connected on line and as a result
of this information does not come handy. The worst of it all is the political
climate, which will not allow foreigners to invest in our securities because of
unforeseen circumstances.
xvi
1.3
1.
2.
3.
4.
1.4
RESEARCH QUESTION
1.
Why are stock market facing the problem of delay in delivering and
settlement of stock transaction?
2.
xvii
3.
How can our political climate not allow foreigners to invest in our
country?
4. Why do government delay to privatize most of the companies in order to
have financial strength in the stock market?
1.5
HYPOTHESIS FORMULATION
H0:
Quoted firm do not perform significantly better then they did prior
to such quotation
H0:
Quoted firm do not perform significantly better then they did prior
to such quotation
2.
H0:
xviii
3.
H0:
fund.
H0:
fund.
1.6
The role of stock exchange and a catalyst in the development of the economy
has not been a question of debtor. The stock exchange exist as a sources of
fund to the industrial development and also for the channeling of personal
savings stock into industrial place for trading companys stock. It also creates
room for capital widening stock rather than deeping it. The benefit of stock
exchange quotation is the result of lower cost of capital when raising fund
through the market as stock exchange helps to allocate funds between
industries and also makes funds available to the most productive industries
which hence develop the nation.
xix
1.7
The scope of this study covers only the role the stock exchange as a marketing
floor for quoted share and stock thereby providing liquidity for the shares and
stock helps in the moping of units of inevitable funds which on the aggregate
dorm large enough capital.
1.8
LIMITATION
These proposition are not easily established with out some constraints here and
there. Some of the problems associated with the study is the lack of data and
stick confidence exclusive to the market. Problem into salient areas were not
allowed rather an exclusive reservation of the market and all information
relating to such area were preserved for the market use only.
Although some members of the exchange assisted with some data information
and oral explanation but not without restriction and limitations.
Another problem is the time allocation in this research work which is not
enough to make a thorough investigation which the topic deservers. The
financial restrictions cannot be left out which also made it impossible to visit
the exchange regularly.
xx
1.9
DEFINITION OF TERM
xxi
REFERENCE
1.
Elect Book.
2.
3.
4.
xxii
CHAPTER TWO
2.0
LITERATURE REVIEW
Different opinions have been expressed about what stock exchange (S.E) is, it
has form time been referred to as the source of capital for business expansion.
During the war between France and England, there was much devastation of
the British economy that it couldnt finance Merchant trade. As a result of this
and the intention to spread the risk arising from the attack of British ships by
pirates, there was need to mobilize capital to finance trade since direct
financing was not enough to sustain the trade levels , and the remedy was the
creation of a formal market. The market on which money is provided.
The stock exchange does exist for the purpose of channeling personal savings
into industrial place for trading company shares.
Since there was the potentials polices of capital widening rather than capital
deepening.
Kenneth Midgley said that the stock is the prime institution in the stock
market and it is a specialist market place. It also provides the mechanism for
the exchange of shares which already exist. But the encyclopedia of banking
xxiii
and finance expressed the view that the exchange themselves do not trade in
the listed securities they merely provide the facilities for trade.
Other opinions such as Christy et al look at stock exchange as an associate of
broker formed to provide improved facilities for the execution of customers
order and the Nigeria stock exchange in her pamphlet question and answer
meant for distribution to the public for enlighten purpose define the market as
A stock exchange is a market where large and small investors alike buy and
sell through stock brokers the stock (or shares) of companies and government
agencies the stock exchange provides the essential facilities for business
expansion and development
xxiv
Perhaps its exclusion policy the prestige it enjoys in all the stock market may
be defined as a market creating form for registered companies who to raise
additional fund for expansion modernization. Purpose by using the facilities
provided in the stock market. It has the ability to bringing together potential
sellers and buyers.
Therefore the prior conception of the stock exchange, as a provider of fund for
the formation of new enterprises is an illusion. Realistically, it could be
properly referred to as a provider of fund for expansion for listed companies
and a market creating forum for the sale of the shares of existing quoted firms.
2.1
xxv
xxvi
more modern practice, the share were generally of fixed though still large
amount of subscription list were kept open until the total sum required had
been raised.
Another landmark in company history accrued in 1962, when an act of
parliament gave limited liability to share holders in the East India, Africa and
fishery companys.
The prolonged war of England and France brought the government into
borrowing in large scale hitherto unprecedented, and there was a wide spread
inflation, which was fed by a rising supply of coins and notes.
Prices rose sharply between 1990 and 1995 and there was great commercial
activity and speculation. It was thin period that produced the first real boom in
company floatation and which brought. The profession of stock broking for the
first time into limelight.
As a result of the prevailing situation then was
government short-term depts. And was normally with people whose market
was obviously wanted, and the uncertainty of payment gave by opportunities to
speculation.
xxvii
It can be safety said that the foundation of modern stock market started from
the tally broken who death with government short-term dept to that turned
their attention to longer term dept and to company stocks and shares in the
seventeenth century. During this periods, the dealing in stock and share were
haphazard and unorganized before 1860 but in the mid-nineties there was
highly developed market.
The whole process of stock exchange evolution was as a result of economic
situation existing at that time accompanied by
government in public
2.2
The Nigerian stock exchange evolve purely out of the act of parliament and
speculation of future business expansion. During the late 50 s when it was
becoming eminent that there was to be independents state and growth of
commercial activities, some Nigerians in collaboration with their foreign
partners (British) wanted a local source of fund for enterprise promotion. As a
xxviii
The need to finance growing budget deficit as from 1958 by the issue of
money capital market instrument.
2.
3.
2.
3.
xxix
As a follow up of bar back committee the Lagos state exchange now Nigerian
stock exchange was established on the 1861 under the Lagos stock exchange
act 1961 no 1 the act states that.
An act to prohibit the carrying of the business of stock broking in relations to
stocks bearers and other securities granted in 1979, there was another
movement in Lagos for the provision of the necessary facilities to handle the
work forested on it by the countrys economic
xxx
2.3
The stock exchange follows the rhythm of the economy, always fluctuating
according to the events in the economy and the absence of the stock exchange
restricts the amount of investment that take place in a country and makes
investment more difficult. It is the investment capacity of any nation that
determine the rate of her economic growth and the level of the peoples
welfare. It is that role of the stock exchange in mopping up money capital for
investment purpose that forms its relationship with the economy.
xxxi
Baumol has this to say that the market for stock and bond perform many
essential and useful function in the limited state economy. This statement was
further buttressed by Christy who said that bulk of American securities (about
one half) of the new savings of the country for investment being raised in the
capital market.
Every economy aims art improving the welfare situation of her inhabitants by
providing quantitative and qualitative consumer product in sufficient amount
and this can only be achieved via investment process. In a well developed
economy the bulk of her inventible fund pass through the stock exchange and
this could be explained by the diagram below.
Stock exchange
Investment
G.N.P
Economy
Market
Increases
Grows
The mopped up capital is invested in the production sector of the economy to
stipulate production and increase the output levels thereby improving the gross
national product (G.N.P) and by making more goods available to the people for
more consumption and improvement of their welfare. This relationship
between the stock exchange and the economy makes the economy and the
stock exchange to often more in the same direction particularly on the
monetary policy influence via its impact on the stock market if the expansion
xxxii
of the money supply reduce yields the discount factors to the future return from
stocks will work to increase stock values.
As the economy improve so also is the stock exchange trade performance
improve this pari-passu movement of stock exchange and the economy
confirms the claim that stock exchange pay close attention to the economys
health. Having being able to always run ahead of anticipated events and the
events when they happen; being so discounted have less effect if any effect at
all.
Therefore, in the strict sense there is close relationship between the stock
exchange and the economy. The stability of any economy and confidence in the
ruling class depends on its ability to improve the welfare situation of the
inhabitants and one way of doing this is by an increase in consumable items
which always come as a result of investment.
For this reason a health stock market is an important ingredient in the capital
formation and economic growth process.
2.4
xxxiii
xxxiv
themselves with companies quoted on the stock exchange and to provide the
need capital for expansion.
2.5
Growth in industry
2.
Cost of capital
3.
4.
Availability of funds
5.
1.
GROWTH INDUSTRY:
xxxv
2.
COST OF CAPITAL:
is the result of lower cost of finance when raising fund through the
market as against the utilization of alternative source and the relation
case of rising found through the market. A high stock price will
exchange for relatively generously quantities of resources, and this is
generously referred to as lower cost of capital. But in reality the cost of
living makes it higher in raising fund through the stock market and
where there are no artificial constraints or the existence of any rigid and
xxxvi
baseless financial tradition, the bank and other financial institution can
provide the needed fund without much difficulties.
3.
4.
5.
The stock market and problem in indigenous enterprises with the number
of listed securities in the Nigeria stock market slow that the stock market
xxxvii
xxxviii
REFERENCES
Kenneth M. (1977) Market and Its Nature and Significance Macmillan Press
limited.
Kuotsyiannis A. (1982) Non-Price Decision the Firm in Modern Context. The
Macmillan Press limited.
Madadilan D.I.L (1977) Guide to Share Investment Long man London.
Mc Rac H. (1974) Capital City London As A Financial center France Caun
cross Eyre Methuen London.
Peter R. (1976) Capital formation Success Investment.
xxxix
CHAPTER THREE
3.1
RESEARCH DESIGN.
This chapter is basically concerned with the design sources of data collection,
population of the study, sample size determination.
These are discussed below.
3.2
AREA OF STUDY
The areas of study was the Nigeria stock exchange market. Generally securities
exchange market and business time.
xl
3.3
The population of this research study is summed up to a total 470 include the
senior and junior staff as a result of the members of staff. It was not possible
reach the entire population, therefore the population was reduce to a reachable
size.
3.4
The population was reduce to a reachable size using the Yero-Yameni Formula
and statistical1
N=
where
N
1 + N (e)2
n = sample size
N = Population size
e = margin of error (5%)
I = constant.
n=
N
1 + N (e)2
xli
470N
1 +470 (0.05)2
470N
1 +470 (0.0025)
470N
1 +1.175
470N
2.175
n = 216
QUESTIONNAIRES DISTRIBUTION AND RETRIEVAL
216 questionnaire were distributed and 213 were returned properly filled while
3 question were not properly filled and was rejected.
3.5
The research made use of questionnaire for data collection. Also directed
observation on was employed sourcing information questionnaire was
constructed in such a way that staff of Nigeria stock
exchange would
understand easily.
xlii
3.6
The research should sourced her date. Through primary and secondary source.
The primary data was collected through the distribution of questionnaire and
direct observation. Also data was collected from post research work journals,
Magazine annual publication. These form part of secondary sources.
3.7
VALIDATION
3.8
RELIABILITY
The reliability of the questionnaire be lest retest method that is last with a
controlled group after two weeks of initial distribution and retrieval
of the
xliii
question. The instrument was administered again to the same group and they
consistency and reliability.
3.9
The use of complex statically and mathematical method of data analysis was
not involved expect the use of sample statically method ie trend and regression
techniques which were used to text some of the hypothesis.
xliv
REFERENCE
Kenneth M. (1977) Business Finance and Capital Market. Mac Million Press
Limited.
Rostow W.W (1968) British Economy of the Nineteenth Century Oxford
University Press Ely House London.
George C (1974) Introduction to Investment New York mc. Grow Hill Book
Company.
Thomas Uyold B J R Money Banking and Economic Activity 3rd Edition.
William Baumol. The Stock Market and Economic Efficiency.
Professor E Morgan The Stock Exchange its History and Function.
R. B Aveago. Ngena Stock Exchange Genesis Organization and Operation
xlv
CHAPTER FOUR
4.1
DATA PRESENTATION
This chapter will be used to present and analysis various data gathered during
the course of this work. This will be accomplished by the use of tables and
percentages.
Question 1
Why are stock market exchange facing the problem of delay in delivering and
settlement of stock transaction?
Variables
No of respondents
Percentage of respondent
Yes
116
53.7%
No
100
46.3%
Total
216
100
From the table 116 respondents said ye to the above question with
corresponding 53.7% while 100 respondent said No to above question with
corresponding 46.3% this means the problem of stock is properly confronted.
Question 2
What cause low participation in firm and individual engaging in the stock
exchanged?
Variables
No of respondents
Percentage of respondent
xlvi
Yes
No
Total
110
106
216
50.9%
49.1%
100
In the table below 100 representing 50.9% of respondents that said Yes which
106 representing 49.1% that said No.
Question 3
How can our political climate not allow foreigners to invest in our country?
Variables
No of respondents
Yes
116
No
100
Total
216
In the table respondent said Yes to the above
Percentage of respondent
53.7%
46.3%
100
question with corresponding
No of respondents
200
16
216
Percentage of respondent
92.5%
07.4%
100
xlvii
From the above 200 representing 92.5% said yes while 16 representing 07.4%
of responds that said No that.
Question 5
Does Nigeria stock exchange face the problem of environment?
Variables
Yes
No
Total
No of respondents
206
10
216
Percentage of respondent
95.4%
04.6%
100
In the table 206 representing 95.4% that said Yes while to representing 04.6%
of respondent that said No this means the problem of stock is properly
confronted.
Question 6
What units of your organization is responsible for environmental factors?
Variables
Yes
No
Total
No of respondents
106
10
216
Percentage of respondent
49.1%
50.9%
100
Here 106 respondents said Yes to the above question with 49.1% while 110
said 10 to the above question with corresponding 50.9%. It also shows that the
problem of stock exchange is properly confronted.
xlviii
Question 7
What are the factors militating against the contract of business environment
factor in your firm?
Variables
No of respondents
Percentage of respondent
Yes
106
49.1%
No
100
50.9%
Total
216
100
From the table 106 representing 49.1% that said Yes while 100 representing
50.9% of respondents that said No.
Question 8
How will you rant the impact of complicity and dynamism of business
environment on you company performance?
Variables
Yes
No
Total
No of respondents
100
116
216
Percentage of respondent
53.7%
46.3%
100
xlix
From the table below 100 respondents said Yes to the above questions with
responding of 53.7% while 116 said No to above question with responding
46.3%. it means that the organization is still facing the problem of dynamism
and environment performing in their company.
CHAPTER FIVE
From our tested hypothesis in chapter four and going by the history of sample
firms; it was observed that the firms.
1.
2.
Merchantile Bank of Nigeria Ltd (sample firm) started on a good note but was
operating on a marginal profit level until 1978 when quotation offered for sale
her shares thereby expanding the capital base and offered the bank more fund
to operate with. Subsequently the profit have improved and by 1983 the
authorized shares of the company rose to b25 Million and the paid up capital
was N13.4 million. The growth rate for the 3 tested operational years is put at
14.10% per annum.
But our second sample firm (unquoted) is characterized by low level capital
base with one time profit and series of losses within the tested period. Through
it managed to maintain a growth rate of 6.7% with as dividends declared.
li
Comparing the two sample firms, it was established that greater advantage
abound in quotations on the Nigerian stock exchange particularly with the
expansion of the capital base and improvement in profit making propensity.
Additional test were carried out to ascertain if.
1.
2.
Both tests proved a positive result which all point at growth in investible fund
when facilities and improved or quotation increased.
Perhaps these indications of public awareness of the stock exchange operations
and the expression of their willingness to hold their money in security raised
via the stock exchange. Therefore stock exchange help in raising up scattered
funds and stimulate individual interests in investment.
5.2
CONCLUSION
The whole exercise has been tedious particularly to a person working with
limited data and distance of research center. Efforts were made to clench some
thing from the individual limited sources. However, going through the work, it
will be realized that Nigeria stock exchange has played its role as a source of
lii
fund for industrial development and expansion. Our tested hypothesis have
proved this.
Therefore I can on all business men irrespective of tribe religion, race, colour
to pool their resources together to have an enlarged enterprises capable of
enlistment. On the Nigeria stock exchange, it is when we are able to do this
that we can place the economy on a viable development path.
Self identification in the form pride of ownership or organization of business
along the family line may not provide the needed capital and the manpower
requirement for effective and efficient operation of their firm.
5.3
RECOMMENDATION
In my opinion and with the present economic crunch in view, efforts should be
made on listing some of the Nigerian firms on foreign stock exchange. This
will help to bring in more foreign currency into the economy. But the fear of
domination by foreign investors might till the idea but the quoted firm should
not be carried whole some to overseas. The percentage of foreign participation
should be clearly specified.
2.
liii
3.
4.
5.
5.4
Studies can be carried out using different types of foreign investors method of
bring in more foreign currency into the economy it is when we are able to do
this that we can place the economy on a viable development path.
liv
BIBLIOGRAPHY
Baumol W.J (1965) The Stock Market and Economic: Efficiency for Diham
University Press New York.
Bickster J.L (1979) Capital Market Equilibrium and Efficiency Implication for
Accounting Financial and Port Folio Decision
Toronto.
Cottrel P.T (1980) industrial Finance 1830-1914 Methuen London.
George C. (1974) Introduction to Investment Mc. Grew Hill Book Company
New York.
Ryder F.R (1974) Thomsons Dictionary of Banking Pitman Publishing N.Y
U.S.A
Rostow W.W (1968) British Economy of the Nineteenth Century Oxford
University Press Ely House London.
Salvatore D. (1977) Development Economics: Mc Grew Hill Book Company
New York.
Solink Brunoh (1973) European Capital Market Lexington Book D .C Health
and Company London.
lv
lvi
APPENDIX
QUESTIONNAIRE
Institution of management and technology
IMT Enugu
Enugu State
Dear Sir/Madam
I am a student of Institution of management and technology, in the department
of business administration and management. This questionnaires is for a
research work being conducted on strategy for managing environmental factors
in Nigeria business organization with particular reference to manufacturing
firms in Aba.
A an employer/member of top management board of this organization your
participation is important for the success of this research work.
I request, you kindly complete this questionnaire as objected as possible so
feel free to express your opinion.
lvii
QUESTIONNAIRE
Please kindly tick () in the option that appropriately represent your response,
do not tick more than one in one question
1.
2.
3.
No (
No (
4.
Yes (
No (
No (
7.
8.
9.
10.
11.
Yes (
No (
No (
No (
No (
No (
No (
lix
12.
13.
Yes (
No (
How will you rank the impact of complexity and dynamism of business
environment on your company performances?
14.
Yes (
No (
15.
16.
Yes (
No (
No (
No (
lx
17.
No (
lxi