The Nigerian Capital market- A Legal summary
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A capital market is an organized market in which both individuals and business entities buy and sell debt and equity securities. It provides structures for transferring long-term savings in the economy to companies and governments for corporate, industrial, and infrastructure development thus reducing their dependence on bank-based financing.
End-users obtain funds from investors (institutional investors, insurance companies, charitable organizations) to achieve their goals while investors yield returns.
Instruments traded in the Nigerian Capital market include: Equity(shares),over 90% of trading activities, Debt(bonds: government and corporate bonds), hybrids/derivatives(futures, options). There is also a commodity market for the sale of commodities such as agricultural products.
The Nigerian Capital Market has witnessed tremendous growth in recent years. The growth is attributable to the Federal Government economic reform programs in the areas of Banks and Insurance companies’ consolidation, privatization, pension reforms, mortgages as well as increased investor awareness, confidence in the market, and relative political stability.
Examples of highly organized capital markets are the New York Stock exchange, American Stock Exchange, and London Stock Exchange. Within Anglophone West Africa, Nigerian and Ghanian Exchanges are the leading exchanges.
REGULATORY FRAMEWORK
The Investment and Securities Act 2007(ISA): established the Securities and Exchange Commission, enlarged powers and functions of the commission over the capital market, provides for a set of new market infrastructure and wide-ranging system of regulation of investment and securities business in Nigeria, especially in the area of Mergers and Acquisition and take-over, collective investment schemes. Section 13(d) ISA, IPF,IST.
The Securities and Exchange Commission: apex regulatory body in the Nigerian Capital Market empowered under the ISA to regulate and develop the market under the supervision of the Federal Ministry of Finance. The regulatory oversight of the Commission covers all corporate bodies and individuals authorized to perform designated functions in the market. These include Self Regulatory Organizations like the Exchanges, Central Securities Clearing System, and other Capital Market Trade Associations.
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