Security Market As A Source Of Finance For The Public And Private Sectors
The security market serves as a vital source of finance for both the public and private sectors, facilitating capital formation and investment opportunities. In the public sector, governments issue bonds and securities to raise funds for infrastructure development, social programs, and other public expenditures. These securities offer investors a safe haven for their capital with relatively stable returns. Meanwhile, in the private sector, companies utilize the security market to raise capital through initial public offerings (IPOs), debt issuance, and equity offerings. This enables businesses to finance expansion, research and development, and operational needs. Moreover, the security market provides individuals and institutions with opportunities to diversify their investment portfolios and participate in economic growth while contributing to the overall liquidity and efficiency of financial markets.
In most developing the establishment and efficient operation of security market has come to be accepted as an important pre- requisite for rapid economic development.
The study is carried out through the use of library (textbook), newspapers and journals.
In chapter I (one) is the background of the study (introduction), statement of the problems, objective of the study, and significance of the study, scope and limitation of the study, and reference.
In chapter ii (two) shows the overview of security market the study critically examines the extent to which security market has contributed to the economic development of the country, government intervention in form of policies and regulatory controls have contributed immensely to the development and expansion of the market.
In chapter iii (three) is the research design and methodology, method of data collection, secondary data location of data and tools of analysis.
In chapter iv (four) is the summary of findings and the general benefit of security market. Chapter v (five) is the recommendation and conclusion, bibliography.
TITLE PAGE
APPROVAL PAGE
DEDICATION
ACKNOWLEDGEMENT
TABLE OF CONTENTS
CHAPTER ONE
1.1 INTRODUCTION
1.2 PROBLEM IDENTIFICATION
1.3 STATEMENT OF OBJECTIVE
1.4 SIGNIFICANCE OF STUDY
1.5 SCOPE AND LIMITATION
CHAPTER TWO
2.1 LITERATURE REVIEW
2.2 DEVELOPMENT OF SECURITY MARKET
2.3 THE NIGERIA MONEY MARKET
THE NIGERIA CAPITAL MARKET
2.4 MONEY MARKET VERSUS CAPITAL MARKET
2.5 SECURITY MARKET AS A MEDIUM FOR FINANCING THE PUBLIC SECTOR
2.6 LONG-TERM FEDERAL GOVERNMENT DOMESTICS FINANCE ANALYSIS
2.7 THE IMPACT OF THE SECOND- TIER SECURITY MARKET ON CAPITAL MARKET
2.8 EVALUATION OF SECURITY MARKET TOWARDS FINANCING THE PUBLIC AND PRIVATE SECTORS
2.9 PRIVATE SECTOR AND THE SECURITY MARKET IMPEDIMENTS OF CAPITAL MARKET IN FINANCING PRIVATE SECTOR.
CHAPTER THREE
3.0 RESEARCH DESIGN AND MENOLOGY
3.1 SOURCES OF DATA (SECONDARY DATA)
3.2 METHOD OF DATA COLLECTION.
CHAPTER FOUR
4.1 FINDINGS
CHAPTER FIVE
5.1 RECOMMENDATION AND
5.2 CONCLUSION
BIBLIOGRAPHY
INTRODUCTION
Security market or financial market in a broad sense is an institutions arrangement that facilitates the intermediation of funds in an economy. Financial intermediation means the mobilization of financial resources from surplus –spending unity and channeling of such funds to deficit –spending units for productive investment and generation of assets or securities exchange such as bonds and shares, which is approved by the exchange authorities. And as a market it acts as a meeting place or where sellers and buyers of financial resources come into contact.
It is also a financial market in which shares, bond debentures stock, treasury bill, treasury certificate, call money and other financial securities are exchanged provide a means through which firms and government raised long-term fund for business expansion and development projects through investors who own shares in business, firm for the eventual economic benefit of all members of all the society.
This market is segmented into two. The money market, which deals in short term funds, and the capital market, which is mainly for long-term, loan able funds. The reason for the distinction between money market and capital market is based on the degrees of liquidity of the instruments traded in. it can be sub-divided into primary market and secondary market. The primary market is that segment of the capital market where financial securities are first floated for subscription. Put differently, it is a market for the quotations of new issues of securities. Secondary market is a market where financial securities that have been fully subscribed and paid for, are offered for sale. In order words it is a market for the transfer of ownership of shares, debenture stock and bonds. In as much as the secondary market dose not has effect on the creation or allocation or newly created wealth (new issues), it still supports the primary market.
The market performs an economic function by facilitating the transfer of real economic resources from the lender to the borrowers. By the inducement of interest income, the market facilitates the transfer of purchasing power from the lenders to the investors who wish to exercise demand over real resources. As a real resources flow from the lenders to borrowers the production of goods and services is enhanced and consequently the welfare of the people is improved.
1.2 PROBLEM IDENTIFICATION
The major features of any financial market is its ability to provide the credit needs of both the private and public sectors which result to economic growth and development. The fundament characteristic of a sound financial system is the ability to finance credit needs which contributed to economic growth without injury to stability.
Though the market have provided the facilities for retaining funds in the economy but still lacks the in-depth and breadth. The major reasons are:
a) The number of individual investors are not still impressive because they do not consider financial market as a source of financing their organization
b) The attitude of investors in buying and holding of securities also contributed to its scarcity in supply irrespective of the establishment of the second tier security market.
c) The stringent rules and regulation imposed by the securities exchange commission for companies to be quoted in the stock exchange.
d) The market infrastructure inadequacies the delay in effecting transaction between issuing houses, broker dealers registrar investors and their bank due largely to the in adequacy of postal and telegraphic services. This discourages many investors based on its performance. This is because it dose not works isolation it needs the co-operation of others financial institutions in discharging its duties and attaining its objectives.
1.3 STATEMENT OF OBJECTIVE
The view of the problems identified it would be appropriate to analyze in-depth in the study how security market could act as a basic foundation in financing public and private sectors. The analysis is as follows.
i. To identify whether the security market is providing long-term and short-term fund to the public and private sectors in Nigeria.
ii. To find out whether the security market help in mobilizing the surplus fund owner to the deficit fund users for long and short –term investment.
iii. To examine the extent the market is providing opportunity to the public and private sectors in buying shares in foreign firms.
iv. To identify whether the market is promoting a rapid capital formation
v. To find out how market is providing sufficient liquidity for public and private sectors in Nigeria
vi. Consequently, to find out whether the market is providing sound financial instrument, through which the apex financial institution (C.B.N) is acting on behalf of the government latter, that is (monetization and demonstration).
1.4 SIGNIFICANCE OF STUDY
This study will serve as a useful guide for effective corrective measures in government parastatals with regards to their financing and the use of security market for effective and efficient profit performance their viability .it will enable the parastatals through it recommendation to explore other avenues to raise funds for their operations.
(Financing market) and not depending solely on government grants and subventions. By generating resources parastatals could now facilitate further investment in terms of their expansion policies as well as encouraging rapid rural development .
These study as part of it contribution will provide avenues for the implementation of cost savings measures in the parastatals
It will also provide solutions that will help the parastatals to facilitate the deserved rapid growth in the development of the national economic.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
With the numerous problems inherent in the search of capital whose firms find it quite difficult. The capital market has now from the nucleus for resolving it.
The scope of this research work therefore lovers all aspect of capital formation put in the private and public sectors of the economy
In cause of this research work extensive work was done not on previous kind of securities. (Shares, bonds, government loan, debentive stock)
Beside, further work was done listing formalities sourcing problem and lost were also considered in all the security market and its allied has been treated in this work.
Research study in Nigeria suffers a lot of limitations. The problems encountered were multidimensional in nature.
It will be pertinent to state categorically that the time period for carrying out the study was a major limiting factor so also was the issue for finance, which is not to be left out.
The search for information for this study was so hectic and frustrating. Because, even the educated ones find it so difficult to co-operate. They believe that it is a waste of time to fill any questionnaires and to give out any information or sit face to face for an interview with the researcher. This is the researcher did not find it easy at all to collect data, especially matters on problem affecting their respective companies, but that is it may be the data were collected and analyzed and the reference drawn from them constitute the subject matter of the next chapter to which we will look into.
Beside, the aspect of money should not be forgotten it is another limiting factor to this study.
Security Market As A Source Of Finance For The Public And Private Sectors:
The security market plays a crucial role in providing financing for both the public and private sectors. It serves as a platform where various financial instruments, known as securities, are traded between investors and issuers. These securities represent ownership or debt in the issuing entity, whether it’s a government, corporation, or other organizations. Here’s how the security market serves as a source of finance for both sectors:
1. Public Sector (Government):
a. Government Bonds: Governments issue bonds as a way to raise funds for various purposes, such as infrastructure development, public projects, or to cover budget deficits. These bonds are essentially debt securities, where investors lend money to the government in exchange for periodic interest payments and the return of the principal amount upon maturity.
b. Treasury Bills: These are short-term debt instruments issued by governments to cover short-term funding needs. They are typically issued at a discount to their face value and mature at their face value, effectively providing a low-risk investment option for investors while providing the government with short-term financing.
c. Government Securities Trading: Government bonds are actively traded in secondary markets, providing liquidity to investors who wish to buy or sell these securities before they mature.
2. Private Sector (Corporations and Businesses):
a. Equity Securities (Stocks): Companies can raise capital by issuing shares of stock to the public through initial public offerings (IPOs) or subsequent offerings. Investors who purchase these shares become partial owners (shareholders) of the company and may benefit from potential future profits through dividends and capital appreciation.
b. Debt Securities (Corporate Bonds): Corporations can issue bonds to raise funds for expansion, research and development, debt refinancing, or other financial needs. These bonds work similarly to government bonds, with interest payments and a return of the principal amount to bondholders upon maturity.
c. Venture Capital and Private Equity: In addition to public markets, the private sector can also raise funds through venture capital and private equity investments. These involve private investors or firms investing in startups or established companies in exchange for ownership stakes. These investments can provide funding for growth, innovation, and expansion.
d. Securitization: Companies can bundle various financial assets, such as mortgages or loans, into securities that are then sold to investors. This process, known as securitization, allows companies to raise funds by essentially converting illiquid assets into tradable securities.
e. Derivative Securities: While these are not direct sources of finance, derivatives like options and futures are traded in financial markets and can be used by companies to manage risk associated with price fluctuations in commodities, currencies, interest rates, and more.
The security market, both primary (new issuance) and secondary (trading of existing securities), provides a mechanism for both public and private sector entities to access funds from a diverse range of investors. It enables efficient allocation of capital, liquidity for investors, and a means for entities to manage their financial needs and objectives. However, it’s important to note that participation in the security market carries risks, and investors should carefully assess their investment decisions based on their financial goals and risk tolerance.