ABSTRACT
This project work is centred on the impact of the
Second-Tier Securities Market on small-scale indigenous industries in Nigeria.
The study was conducted to identify the extent to
which indigenous businesses in Nigeria
are using the Second-Tier Securities Market of the Stock Exchange as a source of long-term finance for
their investment.
Four research questions and three hypotheses guided
the study. The population for the study consisted of all the population
selected from small-scale enterprises and approved stockbrokers including those
that successfully floated indigenous business in the Second-Tier Market. A
sample of five (5) small-scale enterprises in Lagos was drawn through random sampling
technique. A structured questionnaire containing 18 items was used for the data
collection. A point scale in the questionnaire and percentage were the
statistical tools used for the data analysed. The three hypotheses were tested
at 0.05 level of probability.
The findings of the study revealed among others
that: the response on the second-tier securities market is very low due to the
general level of awareness on the economy even among the literate population.
Even with the small number of educated population who invested in the stock
market, the demand for shares often exceed supply because of the small
proportion available for trading.
Based on the findings of the study, a number of
recommendation were made among which is that a formal market for unlisted
securities should be developed so that companies which do not wish to be quoted
on the Stock Exchange could approach this formal market.
TABLE OF CONTENT
Pages
Title Page
Certification i
Dedication ii
Acknowledgement iii
Abstract iv
Table of Content v
CHAPTER
ONE: INTRODUCTION
Introduction 1
1.1 Background
of the Study 2
1.2 State of
the Problem 2
1.3 Purpose
of the Study 4
1.4 Significance
of the Study 6
1.5 Research
Questions 7
1.6 Scope of
Study 7
1.7 Definition
of Terms 8
CHAPTER
TWO: LITERATURE REVIEW
2.1 Relevant
Theories 9
2.2 Indigenous
Business in Nigeria
13
2.3 Contribution
of Small Scale Business 14
2.4
The Problem
faced by Small Scale Enterprises
In Nigeria. 17
2.5
Requirements
for Admission into Second Tier
Security Market 18
2.6
The SSM
Prospectus 20
2.7
Assessment of
the Impact of SSM New Strategies 21
2.8
Constraints of
Sources of Finance 23
CHAPTER
THREE: RESEARCH METHODOLOGY
3.1 Research
Design 24
3.2 Area of
the Study 24
3.3 Study
Population 24
3.4 Sample
and Sampling Method 25
3.5 Data
Collection Instrument 25
3.6 Administration
of Data Collection 26
3.7 Instrument
(Method) 26
3.8 Validity
of the Instrument 26
3.9 Reliability
of the Instrument 26
3.10 Method of
Data Analysis 26
CHAPTER
FOUR: ANALYSIS AND PRESENTATION
OF
DATA
4.1 Introduction
27
4.2 Data
Analysis 27
4.3 Chi-square
Method 27
4.4 Preliminaries
Analysis 29
4.5 Research
Questions 1-12 20
4.6 Hypothesis
Testing 1-3 39
CHAPTER
FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
of Findings 40
5.2 Conclusion 41
5.3 Recommendations 41
Bibliography 43
Questionnaire 44
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
The
small scale industrial undertaking has been widely acclaimed as the bedrock for
any meaningful industrialization programme of any nation especially in less
developed countries. It is in realization of this that government all over the
world has devoted much of the sources and effort towards the development of
such industries. In Nigeria
for instance, the government started its deliberate efforts to develop this
sector since the early 70s through policies contained in the National
Development plans. Furthermore, financial institutions particularly the
development, commercial and merchant banks have been made to extend to a
certain percentage
Despite
all those efforts, the growth of small scale industries has been greatly
hindered mostly by lean financial resource of their promoters. Most of the business concerns do not
have access to the capital market from where long term finance suitable for
sustenance of business expansion could not meet the requirement that would
afford them the opportunity of raising funds through the capital market.
Nigeria
entrepreneurs have been apathetic to seeking public quotation by getting listed
on the Nigerian stock exchange. As at 1982, only three wholly owned Nigerian
companies were listed on the Nigerian stock Exchange market though the Nigerian
stock exchange had been in existence since 15th September 1960. a significant
move towards public quotation among Nigerian companies was achieved during the
indigenization exercise of 1972.
The
programme compelled hitherto foreign dominated business enterprises to all
carrying consequently the number of listed companies as at the end of may 1985
moved up to 44 but it is prompted a seminar on public quotation for indigenous
companies organized by the GLAXOSMIHKLINE NIGERIA PLC in Lagos 1n 1981.
A.
High cost of seeking quotations
B.
Fear of losing control of the business
upon obtaining quotation
C.
Personal convictions (Egocentric reason)
D.
Reluatative disclose occurrence
financial information little or no knowledge of the capital market
In
effect the resolutions formed the bedrock of the introduction of the second
tier security market (SSM) which was launched on 30th April, 1985. In Nigeria, the
SSM is per after then the unlisted company Market (UCM) in the unit kingdom its
primary aim is to provide a platform for small scale businesses quotation. The
main impetus for the establishment of the second tier security business is to
seek quotation on this market.
1.2 STATEMENT
OF PROBLEM
A
company has many financial consideration to make but the main one fall into
three broad categories. The first deals with the determination of a company’s
total financed needs, the second relates to the acquisition of the optimal mix
of such financial needs from different institutions while the third is
primarily concerned with the appropriate management of the monetary instrument
including cash that the company has of important to the study is the second
aspect which deals with the acquisition
of a company’s predetermined financial needs.
A
firm’s capital structure is mad up of its equity, debt and retained earnings.
The attempt to strike an optimal composition in these components poses some
problems, which relates to the desirability of each source, the true cost of
alternative funds and the differential treatment given to firms with respect to
accessibility to funds. It is strongly held that small firms are discriminated
against the market for funds and this only implies that there are imperfections
associated with the size of firms requesting funds from different sources.
1.3 PURPOSE
OF THE STUDY
Although
this study is an academic exercise in fulfillment of academic qualification but
will at the end of the day study the extent to which indigenous businesses in Nigeria are
using the second tier security market (SSM) of the stock exchange as a source
of long term finance for their investment . the SSM is a new development on the
Nigerian stock Exchange (revolved in April, 1984) to cater for the need of
indigenous firms which are mostly small in nature. Until the evolution of the
SSM, the stock exchange market was inaccessible to the small enterprises as the
requirements for listing were two stringent as the requirements for listing
were two strigent the costly for them. Since its inception in 1985, only thirty
small and medium enterprises have so far qualified and is listed on the SSM
despite the relaxation of requirements for entry as observed from the first
phase of the project.
The
appraisal given to the thirty companies on the SSM was based on the growth
prospects of the companies and their significance to the national economy. In
comparing the listed Companies securities, it was observed that instead of the
five year trading record required of the listed companies, the SSM companies
are required to provide a trading record of three years. This makes entry into
SSM easier for them because most of them are young and not have sophisticated
trading records over a long period.
It
is also stipulated that not less than 25 percent of the issued share capital of
the listed companies has been made available to the public but in the case of
SSM companies, at least 10 percent of its shareholders capital must be made
available to the public while the number of shareholders in the former group
must not be less than 500 and the number in the latter group is limited to 100.
Therefore,
the purpose of this study is to:
* Study
the extent to which indigenous businesses in Nigeria or Lagos are using the second tier security
markets (as of the Stock Exchange as a source of Long term finance for their investments.
* Study
the objectives of the second – tier security market with a view to assessing
how far they are being met;
* Carry
out an inventory of all the firms that have so far been listed and analyze
their status;
* Identify
the reason for the low response of indigenous companies in getting listed on
the SSM observed on earlier study;
* Determine
how the requirements for the listing are perceived by the indigenous
businessmen n the light of development stage of the economy;
* Determine
the contribution of the SSM to economic development of Nigeria;
* And
to suggest solutions to the problem identified from the study.
1.4 SIGNIFICANCE
OF THE STUDY
This
study is important for the fact that it will provide explanations for the
operation of the stock market in Nigerian and would offer suggestions on how
best to exploit the market for maximum benefits. The significance of the study
further includes:
·
The study will identify the current
level of the efficiency attained by the stock market, glaxosmithkline Nigeria PLC.
·
The study will identify the current
level of the efficiency attained by the stock market, glaxosmithkline Nigeria
PLC.
·
The
study is expected to put forward
ideas that will make the flow of information about the market
efficient and effective
·
This study will also ascertain the cost
of listing with the market and if necessary effects a change on the current
position.
·
The study will also identify improving
the professional status of the operators of the company.
1.5 SCOPE
OF THE STUDY
The
scope of the study is limited to Lagos
i.e al the branches of Glaxosmithkline Nigeria Plc in Lagos state
1.6 DEFINITION
OF TERMS
SMALL SCALE INDUSTRY
In
the 1989 industrial policy of Nigeria
small scale industries were defined as those with investment of between N100,00
and N2million exclusive of land but including working capital . industries with
investment cost exceeding N100,000 including working capital but excludes land
as regarded as micro or cottage industries.
CAPITAL MARKET
A
Capital market is a mechanism which long term funds with maturity of more than
one year are sourced instruments traded in the capital market include equities,
debentures, stocks, gil – edged securities, state and municipal bonds and
financial derivatives such as options, futures and warrants – Ekinen (1993 –
1999)
MONEY MARKET
Money
market is a mechanism through which short – term funds with maturity of less
than one year are, sourced.
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