CHAPTER ONE

INTRODUCTION

1.10GENERAL OVERVIEW

For any economy to remain afloat in it’s bid for survival in today’s globalization, deregulation and liberalization of markets, it needs to have an efficient financial system to direct the allocation of its resources capital markets and institutions, of which the stock exchange is an integral part of have become of, paramount importance in a dynamic economy as Nigeria.

The capital market is a sub-set of financial system that provides the accelerated growth of the economy. This it does by efficiently channeling fund from investors into productive sectors of the economy. It serves as an avenue for government and companies to raise long-term funds to fiancé their activities.

The capital market consists of a network of institutions and individuals comprised of regulators and operators who, together, facilitate the smooth operation of the market. In other words, the capital market comprises, providers of funds (investors), users of funds (companies and governments), intermediaries (stock brokers, issuing houses, registrars) and regulators (SEC, the Nigerian Stock Exchange and Central Bank of Nigeria).     

The Nigerian Capital Market is made up of basically two components the primary and secondary market. The initial sale of securities from the issuing corporation or government to the investor is done in the primary market. The issuers uses the funds raised to expand production, build infrastructures and the like very few investors can be persuaded to tie up their funds indefinitely. Therefore, securities are usually negotiable,   enabling the initial buyers to re-offer the securities to any interested party at any prices which is mutually satisfactory. It is, therefore, a function of securities exchange to provide an arena where such mutually satisfactory prices may be determined. It is in the regard that it becomes important to analyze the stock pricing function of the Nigerian capital market. 

1.11STATEMENT OF THE PROBLEMS

As a result of both institutional and individual investors staking out their hard earned money in order to earn a reasonable return on securities  acquired in companies, it would be necessary to know whether the shares and securities acquired in companies quoted in  the Nigerian Stock Exchange are property priced. However, there is great need to critically consider the following relevant problems as regards the research topic:

a.           Lack of information from listed companies

b.           Lack of knowledge of the operations and functions of the stock exchange.     

c.           Difficulty in obtaining quotation in the stock exchange

d.           Lack of clear understanding of the pricing of shares and securities in the Nigerian Stock Exchange 

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