APPRAISAL OF THE ROLE OF CAPITAL MARKET IN THE PRIVATIZATION OF PUBLIC ENTERPRISES.
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APPRAISAL OF THE ROLE OF CAPITAL MARKET IN THE PRIVATIZATION OF PUBLIC ENTERPRISES.
Chapter one
1.1 Introduction
It is well recognised that investment in economic growth and development necessitates long-term funding, which is considerably longer than most investors are ready to commit their funds for.
The capital market is a group of financial entities set up to provide medium and long-term loans. It is a market for government securities, corporate bonds, and the mobilisation and utilisation of long-term money for development within the financial system.
In this market, leaders (investors) supply long-term capital in exchange for borrowers’ long-term financial assets. This market includes both the new issue (primary) and secondary markets.
Such securities could be raised on an organised market, such as the Stock Exchange. In this sense, it includes consortium underwriting, syndicated loans, and project financing.
Thus, it is a mechanism via which economic units seeking to invest surplus cash connect directly or through financial intermediaries with those seeking to raise funds for their businesses.
In Nigeria, participants include the Nigerian Stock Exchange, discount houses, development banks, investment banks, building societies, stock broking firms, insurance and pension organisations, the government, individuals, and the Nigerian Stock Exchange Commission (NSEC).
Though the role of the capital market in the privatisation of state firms has long piqued the curiosity of contemporary researchers and economists.This is because the current state of the capital is critical to the effective execution of the privatisation process.
Thus, the Nigerian capital market will play a broad role in privatisation by serving as a venue for the participation of an unusually large number of small investors from across the country in the distribution of shares in firms earmarked for privatisation.
The Bureau of Public Enterprises (2000) highlights several benefits of privatisation, including a reduction in government wasteful spending on enterprise operations, as well as strategic investors/foreigners bringing their money and new technology into Nigeria to run the company, resulting in growth and development of the Nigerian economy.
The Nigerian Stock Exchange has branches in Lagos (1960), Kaduna (1978), Port-Harcourt (1980), Kano (1989), Onitsha (February 1990-August 1990), Abuja Area Office (1990), and Yola (2002). The Lagos Stock Exchange (1960) was changed into the Nigerian Stock Exchange on December 2, 1977.
Finally, it is the responsibility of the Nigerian Stock Exchange to oversee the marketing of this 20% equity shares to the Nigerian public, as well as to ensure that they are evenly distributed throughout Nigerian classes and areas that acquire the 20% shares through well planned communication methods.
1.2 Statement of the Research Problems
The primary goal of this research is to critically evaluate the role of capital markets (via the Nigerian Stock Exchange, Lagos) in the privatisation of public firms. The research work will also investigate and provide answers to the following questions:
i. What actions of the Nigerian Stock Exchange are related to the privatisation of public enterprises?
ii. How much has the Nigerian Stock Exchange contributed to economic development and growth?
iii. To what extent has the government’s development stock rate affected the rate of stock market capitalization?
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