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Chapter one
1.1 background of the study
Nigeria has a formal and active capital market. Before 1961, almost all formal savings and deposits went through the banking system while the then colonial masters invested major capital balances for the country on the London stock exchange. However, following the establishment of the Central Bank of Nigeria (CBN) in 1959, it was logical to have a stock exchange in 1960, whichmenced operations in 1961. Thus, the foundation was laid for the operation of the Nigeria capital market. Earlier in 1959, the central bank of Nigeria had floated the first Nigerian development loan stock, which was listed overseas. Subsequent issues in 1961 and thereafter were listed on the new local exchange.
The Nigerian stock exchange is a private, non-profit making organization, limited by guarantee. It was incorporated via the inspiration and support of businessmen and the federal government through the CBN, but owned by about 300 members. The membership includes financial institutions, stockbrokers and individual Nigerian of high integrity who have contributed to the development of the stock market and the Nigerian economy. The council members (board of director) of the stock exchange are elected at each annual general meeting by members of the exchange. The tenure of the presidency is limited to one three - year term. The council is responsible for policy - making but the Director-General (formerly Prof. Ndi Okereke-Onyiuke and presently, as at the time of this research, Emmanuel Ikhazobor) and his/her team of executives administer the day to day affairs of the exchange. The council members, management and staff of the Nigerian stock exchange as well as stockbrokers are subject to a stringent regime of codes of conduct, which calls for a high degree integrity, discipline, sacrifice and high sense of patriotism. Dealing members of the stock exchange are the stock broking firms licensed by the exchange to buy and sell shares on behalf of the investing public. There are over 200 of them at the moment.
The exchange is a Self-Regulatory Organization (SRO), making and enforcing rules for its members. In 1977, the exchange was reorganized and renamed The Nigerian Stock Exchange (NSE). Today, the NSE has 10 functional trading floors in different parts of the country, namely: Lagos, Abuja, Kaduna, Port Harcourt, Kano, Onitsha, Ibadan, Yola, Benin, Uyo, and Ilorin.panies listed on the Exchange cut across the economic sectors of Nigeria and include local affiliates or subsidiaries of multinationals. The exchange has two tiers: 1st tier securities and second tier securities. The Nigerian capital market, like elsewhere, is a regulated market. Apart from the regulatory actions of the exchange as an SRO, government oversight on the capital market in Nigerian is achieved through the operations of the Securities and Exchangemission (SEC). It maintains surveillance over the securities market to ensure orderly, fair and equitable dealings in securities, protecting the integrity of the securities market against abuses arising from the practice of insider trading.
However there have been reports of financial misappropriation leading to the bankruptcy of the exchange and management crisis as a result of allegations of insider trading and manipulations in prices of shares. The current upheaval in the exchange has led to the summary dismissal of the Director-General (DG) of the exchange, Prof Ndi Okereke-Onyiuke and its president, Alhaji Aliko Dangote. Interestingly, before their sack, the two parties have thrown accusations at each other. While Dangote accused Ndi Okereke of misappropriating funds, Dangote was accused of manipulating share prices of African Petroleum (AP). The interest of this research is to assess the impact this crises has on the Nigerian capital market.

At the Nigerian stock exchange (NSE), buyers and sellers are the same people. So the market is no more than a manipulative institution; where corruption and lack of transparency have brought misery and poverty to investors. Or how could one describe a situation where market crashed in 2008 with capitalization collapsing from N15 trillion to N6 trillion without anybody lifting a finger? (Etubom; 2010).
Because of this known deficiency, corruption has permeated the system; there is price-fixing and overvaluation of shares. Initial Public Offers (IPOs) are manipulated.
Most executive and council members of the exchange stooped so low to collaborate with stockbrokers by leaking information thereby manipulating prices of shares.
The universal banking, which brought the banks into stock broking business, did not help matters either. The banks saw the loopholes in the one-man market and went for the kill and there by destroying themselves and the market.
Operators and dealers alike were "deceived" into believing that the Nigerian economy is shielded from the global economic meltdown that hit the world economy. This further fueled theplacency of the operators and dealers towards taking precautionary measures to absorb the shock of global economic meltdown.
The objectives of this research among other things are to appraise the extent to which the Nigerian capital market has been affected as a result of the crises in the stock exchange.
The study also aims at taking a cursory look at the cause of the crises and how to manage it.
It is also of interest to appraise the rational for making the exchange a self regulatory organization.
In addition to the above, this work also seeks to ascertain the effects of the crises on investors' confidence in the market and the general response of the economy to the crises.
To achieve the above objectives, the following research questions were raised.
1 what are the achievements and challenges of the Nigerian stock exchange in developing the capital market?
2. What roles did the global economic meltdown play in the crises?
3 Is the crisis individually motivated or generally a managerial and system failure?
4 how do investors respond to the capital market during and after the crises?
5 what steps have been taken to manage the crises and restore confidence back?

I Ho: Manipulation of share prices does not significantly affect the market.
Hi: Manipulation of share prices affects the market.
II Ho: Insider trading is not a significant factor in destroying confidence in the market.
Hi: Insider trading is a significant factor in destroying confidence in the market.
III Ho: The crises in the exchange has not affected the
Nigerian economy in any way.
Hi: The crises in the exchange has affected the
Nigerian economy in some ways.
IV Ho: There is no significant relationship between the
global economic meltdown and the crises in the Nigerian stock exchange.
H1: There is significant relationship between the global
economic meltdown and the crises in the Nigerian stock exchange.

The study covers the Nigerian capital market as a whole and the Nigerian economy. The Nigeria stock exchange is taken holistically but with the Onitsha branch of the exchange as a contact point. It covers all relevant issues pertaining to the Nigerian capital market and the Nigerian stock exchange vis- -vis the Nigeria economy.
It also takes into account, the role of SEC in managing the crises in the exchange and the role played by CBN.
Ultimately, the study elicited investor's response and positions as it regards the exchange and the capital market. To achieve this, investors in Enugu metropolis were selected.
In the course of this study, the researcher encountered problems which in one way or the other challenge the easy flow of this work. These include:
a. Distance: in the course of this study the research was faced with the challenge of actually traveling to the Nigerian stock exchange in Onitsha and visiting some stock broking firms in Enugu. b. Time: it seemed there was not enough time to meet up with this work. But the researcher properly managed his time effectively and efficiently. c. Finance: at a time it was difficult and almost impossible to continue because of lack of finance. d. Fatigue: the human factor also tried to hamper this study by constant body breakdown as a result of fatigue, tiredness and distractions. e. Hoarding of information: during the research, I noticed that those approved for information were not really willing to give it.
It is a noted fact that for any meaningful economic transformation of a country to take place, her capital market must be effectively active. It has also been an identified fact that economic strength of any nation is measured according to how active or effective her capital market is/or performing its supposed functions.
This study will be of significant interest to government and the central bank of Nigerian as they are aware of the problems facing the Nigerian stock exchange and remedies to tackle these problems.
The study will also be significant to institutional operators of the market especially the Nigerian Securities and Exchangemission (SEC) and the future researchers who may want to share this experience.
This study will be of interest to investors who have been at the receiving end of the crises in the exchange. They will be able to know the real cause of the problems, response of SEC and efforts being made to protect their investments.
The significance of this study will provide foreign businesses with the facilities to offer their shares and give the Nigerian Public an opportunity to invest and participate in the share and ownership of foreign businesses.

For the purpose of this research, the under listed terms are defined thus:
1 Stockbroker: as agent who buys and sells securities on a stock exchange on behalf of clients and receive remuneration for this service in form of amission.
2 Stock Exchange: a market for the sale and purchase of securities, in which the prices are controlled by the laws of supply and demand. Nigeria stock exchange started in 1960 butmenced operations in 1961.
3 Stock Holders: individuals, businesses and groups owning stocks in a corporation.
4 Capital Market: a market in which long - term capital is raised by industry andmerce, the government and local authorities. The moneyes from private investors, insurancepanies, pension funds and banks and it's usually arranged by issuing houses and merchant banks.
5 Financial Instrument: a contract involving a financial obligation. Examples include stock, bonds, loans, and derivatives.
6 Shares: a share confers on its owner a legal right to have part of thepany's profits and to exercise any voting rights attached to that share.
7 Securities and Exchangemission (SEC): SEC is the regulatory arm of the Nigerian capital market.
8 Arbitrage pricing theory: a model proposed by Stephen Ross in 1976 for calculation returns on securities. It assumes a number of different systematic risk factors without however, definitively identifying the various types of risk.
9 Financial Institutions: these are institutions that use its funds chiefly to purchase financial assets, deposits, bonds, loans and so on.
Alite H. I (1984): the Nigerian Stock Exchange Historical Operations and Contribution to Economic Development Bullion of the Central Banks of Nigeria.
Okigbo P. C (1981); the Nigerian Financial System Longman Essek.
Oxford Dictionary of Accounting Third Edition
Lead capital (2010): Stock Watch a Guardian Publication
Ndi Okereke J- Onyiuke (2101) Overview of the Nigerian Capital Market.
The Guardian Newspaper: Friday August 6, 2010 p. 14

Securities are traded in a variety of forms and in diverse trading places. Wall Street is where it all began (The New York Institute of Finance; 1992), but one will see that the Nigerian financial market - place today bears little resemblance to its origin there.
According to the Institute, prior to the Revolution, New York City's leading merchants met daily under a buttonwood tree located at what is today the corner of Wall and Broad Streets. These early merchants traded inmodities such as furs, tobacco and currencies and provided services, such as insuring ships' cargoes.
Aspanies were organized to conduct different types ofmercial activities such as banking, retail trade, or shipping, an informal market in shares of thesepanies developed among the merchants who controlled them. Twenty four of these early merchants, or stockbrokers, as they came to be called, entered into a formal agreement on May 17, 1792, to trade only among themselves and to maintain agreed - onmission rates. This marked the founding of what is today the New York Stock Exchange (NYSE).

There are many views of what a stock exchange is. To F. E Armstrong(1994), author of "The Book of the Stock Exchange" a stock exchange is defined as "the citadel of capital, the temple of values. It is the axe of which the whole financial structure of the capitalist system turns". Literally however, a stock exchange can be described as a market for securities. A place where securities (Bonds, stock and shares) of varying types are traded openly, and where one can purchase or sell any of such securities relatively easily.
According to Alile and Anono(1986; 29), securities are documentary evidence of ownership or entitlement to claim upon the assets of the issuing organization, which may be a business firm of the issuing organization, government. These documentary evidences usually have no fixed or absolute value but are traded on the stock exchange at values which are subjectively determined by those buying or selling them.
Professor F. Okafor (1983) describes a stock exchange as an organized secondary market since a stock exchange is really strictly a market for existing rather than new securities.
The stock exchange provides an avenue for the movement of long-term capital funds from those with savings to invest in those areas of industries, merce and government where funds are lacking for expansion and other developmental purposes.
The stock exchange is also an institution which sees to the efficient allocation of available capital funds to the diverse uses in the economy, and through its sensitive pricing mechanism ensures that so much of the total available capital resource are allocated to each firm within each industry as that industry deserves to have, having regards to their relative contribution to total societal wealth or satisfaction vis- -vis other firms or industry.
According to Alile and Anorno (1986), the stock exchange can also be a mechanism (barometer as some would suggest) which can measure and detect the symptoms of an impending economic boom or decline long before the predicted prosperity or decline actually occurs. The stock exchange is able to change in economic conditions and trends which are a reflection of the total psychology or judgments of persons using the stock exchange, among whom the professional investment economist or analyst exerts the greatest influence.
2.2 The Nigerian Capital Market
The Capital Market, according to Professor Ndi Okereke Onyiuke (2010), is made up of markets and institutions, which facilitate the issuance and secondary trading of long - term financial instruments. She argued that the capital market, unlike the money market which functions basically to provide short-term funds, provides funds to industries and governments to meet their long term capital requirements, such as financing of fixed investments - buildings, plants, machinery, bridges etc.
The Nigerian Capital Market is a market for sourcing of medium and long-term funds by both the government and private sectors of the economy. The strategic roles of the capital market in the allocation of scarce financial resources for rapid economic growth and development of any nation is well documented. For example, Oladejo, R. (2003) enumerates the gains of the Nigerian capital market as follows:-
Helps the economy to increase capital formation; Provides funds to government andpanies at more attractive terms; Provides best source of funding for SME growth; Subjects firms to market discipline thus enhancing chances of success; Provides the necessary elements to manage financial risks and Ensures continuity of the enterprise long after the founder. In the book "The guide to investing in emerging securities markets", Dr. B. Persuade (1990), further enumerates the role of capital markets in economic development to include:-
Provides additional channels for encouraging and mobilizing domestic savings for productive investments and an alternative to bank deposits, real estate investment and the financing of consumption loans; Fosters the growth of the domestic financial services sector and various firms of institutional savings such as life insurance and pensions; Provides savers with better protection than most debt instruments against inflation and currency depreciation and thus alleviates two of the major reasons encouraging the flight of domestic capital aboard as well as providing attractive vehicle for repatriating flight capital; Encourages privatization by increasing the marketability of new issues. This marketability also facilitates the dispersal of ownership form traditional industrial and financial interests; Improves the gearing of the domestic corporate sector by facilitating equity financing, and this helps to reduce corporate dependence on borrowing, thus making the financial system more solvent; Provides, through equity financing, a cushion forpanies against the variability of cash flows and even possible losses. Also, it is permanent financing which does not demand regular fixed returns like debt. With all the above enumerated roles of the Nigerian capital market, however, attainment of such goals is not feasible without the pivotal role of the Nigerian stock exchange. The Nigerian capital market without the Nigerian stock exchange is like a car without a fuel to propel it.
The Nigerian stock exchange is therefore a self - regulatory organization (SRO). It regulates its members (brokerage firms). It also regulates its listedpanies to ensurepliance with listing rules. Directors ofpanies stand in a fiduciary relationship with theirpanies and are expected to run theirpanies with utmost good faith, petence and integrity. Auditmittees of publicly quotedpanies are also vital organs of integrity in corporate governance. External auditors also play a pivotal role in ensuring the integrity of information emanating formpanies quoted on the exchange, as they are statutorily required to attest to the financial statements published by suchpanies. Others include issuing houses, reporting accountants, lawyers and investment analysts.
Sadly, however, the Nigerian stock exchange is yet to score high on integrity. Witness the AP debt concealment saga, the famous Nestle Foods and Unilever shares scam. Asalu A. (2002; 67) pointedly accused the Nigerian Stock Exchange (NSE) and its subsidiary Central Securities Clearing Service (CSCS) limited of engaging in insider dealing. The Central Bank of Nigeria (CBN) has also been persistent in accusing banks, many of them players in the capital market, of consistently sending false returns to it. For example, in the wake of the closure of savannah bank plc (before its license was released back in 2010), CBN reported that it was unable to confirm a figure of N2.2 billion sad to be cash in hand in the bank on a particular day for the simple reason that several rural branches of the bank were reported to be holding cash far in excess of their deposit base (Adewale; 2006)! In the same vein, Onosode, G. O (2001) is unrelenting in his attack on Nigerianpany directors who allow personal interest to colour their official actions and some Nigerian auditors who allow their cozy relationship with directors to colour their disinterestedness in carrying out their work. Yet, to say that lack of integrity is peculiar to the Nigerian capital market is to miss the point.
However, the crisis of integrity is exacerbated in the Nigerian capital market scene for reasons that include:-
Absence of a strong and well funded regulator; A socio-economic environment that extols wealth however made; An investor group that is largely illiterate and fragmented; Suffocatingpetition that encourages unorthodox practices as firms try to stay afloat and ahead ofpetition; Weak legal framework; Weak internal control environment as a result of employment polices that place less emphasis on merit and integrity; Apany directorship class that is greedy and self serving; Weak auditmittees as a result of membership that is largely financially illiterate and ill-motivated because of absence of remuneration for services rendered; Weak external audit function partially as a result of few bad eggs in the profession and partly as a result of fetters placed on independence of the auditors in actual practice (Uche Ezechukwu in business day august 18, 2010). 2.3 NSE CRISIS: THE ROOT CAUSE
According to a financial times report of June 23, 2008, some investors were, even prior to the global economic meltdown, "troubled by high valuations, dubious corporate governance, rampant speculation and suspicions of market manipulation. So even without the global downturn, according to the report, the over-inflated Nigerian stock was subject to wide spread abuse and insider trading of unimaginable magnitude and was headed for disaster.
The period 2002 - 2008 was a one of boom for the Nigerian economy. Nigeria's foreign reserves rose to $57.2bn at the end of December 2008. Crude oil prices hit a peak of $147 per barrel in July 2008.
During the period, Nigerian stock market capitalization rose to peak at N12.6 trillion on March 2008. The boom in stock led to a mad rush by almost all Nigerians to invest in stocks. According to Singleton (2008; 9), "Banks in the country exploited the made rush and transformed themselves into issuing houses, brokers and bankers all in one (all the Nigerian banks formed issuing houses). They capitalized on the boom to exert money from the unsuspecting public".
In the same vein, Agbana (2009; 6) argued that "some banks embarked on multiple issues over short period of time, throwing capital market rules and regulations on offer of issues to the wind. In a period of three years, a notable bank in the country, organized three public offerings, first in 2005, then in 2006 and again in 2007. They were raking in money from the unsuspecting public, until the shares price of the bank peaked at N35". The rising share prices encouraged more people to borrow and invest; hoping that the shares prices would rise further. The price rose above the capacity of ordinary people to buy shares and the stockbrokers simply lent more.
The speculation thus fueled further rises and created an economic bubble.
Lamenting on the rottenness of the Nigerian capital market, Olawale (2010) an investment analyst, accused that "Banks simply issued new shares and lent money to their customers to invest in those same banks' shares. Moreover, the banks would simply use depositors' money to invest in those shares, thereby creating artificial robustness in the market". They (banks) lent millions to their staff and coerced them sometimes against their wish to invest in the banks own shares. March 2008, a rumor that the central bank and Securities and Exchangemission (SEC) had ordered banks to stop making loans to stockbrokers for margin trading led to a 15 percent fall in three month (John Udonsak, vanguard newspaper; 16 march 2008) indicating how fragile the market's foundations were. Investors were shaken, stock prices sank and liquidity from margin lending evaporated.
Part of the causes for the present crisis is that a lot of Nigerian stock brokers were stuck with the loans and the banks with liquidity problems, while certain chief executives of some banks became richer than their banks. Thus even without the global downturn, even without the alleged repatriation of foreign funds, the Nigerian Stock Market was inflated, artificial; the correction would have been as shocking and painful. The artificial boom led to a burst.
Prior to august 6, 2008, which was the scheduled date for the council of the Nigerian Stock Exchange to elect the next president to take over from the outgoing Chief Oba Otudeko, forces from the inner caucus of the stock exchange were scheming to frustrate Alhaji Aliko Dangote's bid to become the head of the exchange. According to Okezie (in Guardian newspaper), public perception of Dangote was poor due to his alleged involvement in AP's share price manipulation Saga. To boost investors' confidence in the face of the above allegation, some people were thus bent on preventing Dangote from becoming the President. However, Dangote emerged the president of the Nigerian Stock Exchange because the exchange has a laid down rules and regulations similar to that of Institute of Directors (IoD) for electing next president (NSE monthly newsletter, 2009).
According to the NSE rules pertaining to the selection of a president, the first vice-president to the outgoing president is always elected the president except there is a major development of statutory reasons to set this procedure aside (NSE 2009).
According to Kingsley (in Guardian, Wednesday, August 18, 2010), an obvious manifestation of the rots in the NSE occurred when SEC suspended Nova finance securities on March 26, 2009, after investigations uncovered unethical practices of insider trading. According to him, the investigation triggered another probe into Afribank Registrars; accused of aiding and abetting the unethical practices by Nova finance securities. In the same vein, Ben (2010) argued that "though the suspension and fine of Nova finances and securities may not be evidence of the guilt of AfriBank registrars but it suggested evidence ofplicity of the group of Dangote consortium partners in masterminding the fraud".
Dangote and Nova with the assistance of Afribank registrars were said to have swapped a total volume of 500, 000 units of irredeemable non-cumulative convertible preference shares in 10 different transactions, which were admitted to the daily official loss of the Nigerian Stock Exchange. In reacting to this situation, Femi Ofedota, the owner of African Petroleum(AP) in an interview granted to Vanguard Newspaper( September 26, 2009) said "the ensuring panic and loss of shares values created a scary scenario for AP investors. The result was that shareholders lost confidence in AP shares, leading to massive exodus of existing shareholders, who hurriedly offloaded their AP shares thus precipitating a sharp decline in its price". It is therefore evidenced by Dangote's ascender to presidency of NSE that not even the AP share saga could stop him from being elected.
But in a twist of fate, the euphoria that followed his landslide victory at the NSE election was cut short by the federal high court in Lagos, which nullified the election; shareholders of African petroleum plc. The shareholders had sued Dangote, Nova Finance and Securities Limited NSE and others over alleged massive manipulation of AP shares.
According to Ndukauba (2010; 9) an official of Afrinvest Nigeria, "the court cases that trailed Dangote's presidency and the nullification of his election as the president and chairman of the council of NSE brought humiliating experiences and trauma to the then Director General (DG), Okereke Onyiuke that she and her management team decided to subtly distance themselves form Dangote and avoided him whenever he visited the exchange".
This, according to him, "piqued Dangote, who, with his financial influence got some close associates of Okereke-Onyiuke to his side and started to gather incriminating information form the exchange with which he petitioned SEC, alleging that the exchange was insolvent.
The disagreement within the NSE council is believed to be connected with Prof. Okereke Onyiuke and some council members' argument that it was better for Dangote to "step aside" while defending himself in court. Dangote, according to Boniface Keizer (2010; 45) rejected the proposal. Instead, in a swift reaction, Dangote in his petition accused the management of the NSE of misappropriating over N11 billion between 2007 and 2008.
In the petition to the SEC, Dangote alleged that the billions spent in the period, Okereke Onyiuke used N4.2 billion to "develop the market". The expenditures being questioned by Dangote include theN450 million for international travels, N125 million on business and local trips, N70 million on trips to Abuja, N980 million for personnel training, and others (the Guardian, Friday August 6, 2010).

The government regulator of the Nigerian capital market is the Securities and Exchangemission (SEC). It derives its legal muscle form the investments and Securities Act of 1999 (ISA) and has as its major functions the following:
Investor protection thereby enhancing their confidence in the capital market; Ensuring of orderly and equitable dealings insecurities business and Promotion of capital market growth and development. Okereke (2002) opines that in designing a regulatory framework, a delicate balance have to be struck between allowing the market sufficient room to carry out its functions while at the same time ensuring that practices that impinge the integrity of the market are prohibited. In the wake of the crisis in the NSE and carrying out its oversight regulatory functions, SEC on Wednesday August 4, 2010, announced the removal of the Director General of the NSE, Okereke-Onyiuke and directed Dangote to cease acting as president of the council, in line with a subsisting court order, pending the final oute of the litigation.
According to SEC's spokesman, Mr. Lanre (in The Nation Friday, August 6, 2010), "these decisions were taken in the public interest to protect investors in the market in line with the investment and securities act (ISA) 2007. He added that the SEC had become concerned about recent development in the NSE, particularly inadequate oversight litigations resulting form boardroom succession squabbles, allegations of financial mismanagement, governance challenges, and delay in implementing the succession plan of the exchange carefully weighting the implications of direct intervention in the affairs of the exchange on the market against the morepelling goals of safeguarding the public interest and investors. The SEC hopes that its actions will reinforce the integrity of the markets, demonstrate itsmitment to accountability and boost the confidence of the general public in its ability to step in decisively when necessary". Collins (2010; 3).
Many reactions have trailed the SEC's response to the crisis. National coordinator of Proactive Shareholders Association of Nigeria (PSAN), Oderinde Taiwo said that "it is too early to draw conclusions, adding that external auditors should be allowed to look at NSE's finances". He also argued that Dangote's motive is highly suspicious; pointing out that it is not unconnected with the court case instituted by shareholders against the election of Dangote as NSE president.
On the other hand, a founding member of the Shareholders Solidarity Association (SSA), Gbadebo Olatokunbo believes the investors would benefit from the turn of event. According to him, the unfolding scenario is capable of lifting investor's confidence in the market (Nwabueze; Newswatch, 2010)
Similarly, Ndukauba (2010; 9) said that "the SEC had done the right thing so that market confidence will be sustained". Kingsley Okon of BGL securities, however, said that nothing really has exchanged. According to him, whoever becomes the director general of NSE will not change things much. "The management of the exchange is not responsible for what happens in the market in terms of market performance. It is the performance of the individualpanies in the market that constitute the true state admitted that what the management of SEC does is to ensure that the operating environment runs according the stipulated rules and regulations.
Already, some stakeholders have called on the economic and financial crimesmission (EFCC) to wade into the matter as part of strategies to ensure a thorough job is done.
For example a Lagos based economist, Dr. Mike R. Ogie during a seminar presentation in Enugu, said that the EFCC and other security agencies must not wait to be invited before "taking the bull by the horn".
He added that in other parts of the world especially in the developed societies, similar issues are given urgent attention because of their ability to harm the larger economy.
According to him, "the stock exchange is the heart of any economy for a privileged insider to allege fraud in the manner that Dangote has done speaks volume".
Basically, the imbroglio in the Nigerian stock exchange has had far reaching impact in the Nigerian capital market. The impact of the crisis in the capital market is both of positive and negative one.
In the positive sense, the shake up in the Nigerian stock exchange was necessary for the protection and safeguard of investors' interests. According to Larne (2010), "investors would benefit from the turn of event because the unfolding scenario is capable of lifting investors confidence in the market since it is to protect their investments.
Another positive impact is of the crisis is its ability to educate investors and the general public on the state of affairs in the market. No doubt the turn of events in the capital market is not palatable with investors and the economy at large, but it sure has a positive impact on how investors should approach the capital market. It is obvious from the unfolding events, that most investors and stockbrokers approach the Nigerian capital market as though it were money market.
They invest and hope to reap 100% return in few months time. Their desire to reap in a short-term motivated then to engage in high speculations which invariably influenced stock prices.
The timely sanction of the management of the NSE by the SEC is a positive pointer that the regulatory body is not oblivion of sharp practices in the capital market. This is in tandem to her promises when she took over as DG of SEC. Barely a month after she assumed office as the Director General of SEC, Ms. Arunma Oteh, "promised tougher sanctions for anyone who infringes on capital market regulations. She stressed her determination to eliminate sharp practices, deter malpractice and change behaviors by ensuring that both the institutional and personal costs of any wrongdoing are extremely high".
In an interview granted to Daily Sun on Monday, August 23, 2010, the president of chartered institute of bankers of Nigeria (CBN), Laoye Jaiye Ola pointed out that the sack of the NSE management was necessary to engender accountability and transparency in the market. He said "a lot of people believe that all is not well with the NSE's accounts. The only way for the management of the exchange to redeem its reputation and that of the market is to allow external auditors".
However, the negative impact of the crisis is more far reaching than the positive effect. The question of investors' confidence in the market is in doubt as investors are gradually pulling off their investment from the market.
According to a former governor in Ogun State, Olusegun Osoba, the hundreds of millions of naira he sank on stocks had all gone down the drain.
His regrets: "if I had known it would be like this, I would have stuck to my strategy of buying property. I was persuaded into it and it hit me hard. You can imagine when First Bank went from N48 to N13. Then Access Bank went from N20 to N3".
According to Mr. Oladipo Williams, immediate past president of Chartered Institute of Stockbrokers (CIS), "there is considerable loss of confidence by the generality of investors which invariably causes low patronage in the market"
As reported in Business World of Monday August 16, 2010, "investors believe that the massive movement of security operatives into the financial sector at any time of change instills fear in them and creates an impression of insecurity".
Dr. Prosper Ahworegbe, a medical director/shareholder, said "the sack had discouraged him and his friends form investing in the market for now because according to him, he has suffered enough losses and sleepless rights over the crisis".
As a result of loss of investor's confidence in the market, the all share index depreciated by 105.39 points or 0.4 percent to close on Friday, August 6, 2010 at 25, 738.79. Market capitalization lose lower at N6.3 trillion (from N15 trillion). The table below represents the impact of loss of investor's confidence in the market Nigerian capital.
Table 2.1
Share index
No of deals
Volumes of shares
Values of shares
Market capitalization
25, 634.39
5, 997
193.3 million
N2 billion
N6, 269 trillion
25, 418.84
6, 804
266.2 million
N1.2 billion
N6, 216 trillion
25, 691.30
3, 469
266.2 million
N 925.8 billon
N 6, 283 trillion
25, 715.39
1, 882
129.1 million
N 639.4 billon
N 6, 289 trillion
25, 738.79
6, 394
184.4 million
N 2.6 billon
N 6, 294 trillion
25, 606.09
8, 895
201.1 million
N 1.8 billon
N 6, 262 trillion
25, 032.09
6, 558
259.8 million
N 1.4 billon
N 6, 121 trillion
24, 988.03
5, 208
164.2 million
N 3.2 billon
N 6, 100 trillion
25, 984.80
6, 092
145.2 million
N 2.3 billon
N 6, 110 trillion
25, 156.46
5, 819
445 million
N 2.9 billon
N 6, 152 trillion
25, 170.02
6, 285
263 million
N 2.1 billon
N 6, 155 trillion
25, 106.89
6, 054
292.5 million
N 1.6 billon
N 6, 140 trillion
25, 321.06
5, 680
195.1 million
N 1.6 billon
N 6, 108 trillion
N2.1 billon
N 5, 937 trillion
Source: Lead capital daily market report. (August 2010).
From the above data, it is clear the loss of investors confidence has struck the market, reducing the market capitalization from N15 trillion to N6 trillion. Beyond investors' confidence, however, the stock market is characterized by its volatility. What exactly causes its rises and falls has several explanations. Some of them are obvious whereas others are not so easily determined. Most of the market movers are economic, political and societal character.
According to Hulbert (2008;37), some of the factors that cause movement in the stock market have long term effects while the influences of others are felt only in the short-term.
Some of the easily determined market movers include:
a. inflations b. earnings c. interest rates d. domestic political run out e. terrorism and times of war f. oil and energy prices g. crime and fraud h. uncertainty Numbers (g) and (i) play an extreme role and could adversely affect investors' confidence.
Insider dealing is another practice that erodes market confidence. According to Evelyn-Oputa (2009), insider dealings take various forms, but in a typical case, shares of thepany in which the insiders are interested are quickly and discreetly acquired in order to keep from driving up the price whilst shares are being purchased. This could be achieved by deliberately spreading inaccuracies and misstatement about the firm. Upon thepletions of acquisition of the desired level of the interested shares, favorable information about thepany is circulated to instigate naive investors into purchasing the same shares therefore bidding up their prices. When the price has reached a high enough level, the accumulated holdings are liquidated for huge profits. Such illegal practices not only shatter confidence of clients and investors on the fairness of the capital market, but also have far-reaching repercussions for the growth of the economy.
In all instances, the beneficiaries of insider dealings are either professional market participants, their clients in the illegal trading activities and/or institutions trading for their own account.
Oladayo (2009; 18) argues that the motivation for insider dealings is always the same: greed and the desire to make huge profits on the basis of privileged information. Conversely, the losers are investors, whose decisions are affected by this misappropriation of non - public information; the capital market, whose credibility is affected by the breach of trust and confidence and the economy as its growth is stunted by this disruption of the capital information process.

According to Oba Ekiran (1999; 12) in Chuke Nwude (2003; 402), the importance of capital market to a country's economy could be felt under the following points:
1. Provision of market facilities and encouragement for the surplus units to pass their savings to deficit units on the understating that the market infrastructure is in place; qualified and certified operators are available; regulators are there to blow the whistle wherever there are infringements that violate the rules of fairness, mercial honor and integrity. By the above, the crisis in the NSE being the trading floor of the capital market will definitely affect the role of fund transfer from surplus units to deficit units which generally may stunt economic growth.
2. Capital formation to augment working capital, project finance, plant expansion or refurbishment or information technology upliftment.
The above role of capital formation will be challenged when there is a question mark on the integrity of the management of the NSE. This argument is readily buttressed with the dismal fall in market capitalization form N15 trillion in 2008 to N6 trillion as soon as the crisis started.
3 A barometer for measuring the performance of the economy to find out whether the economy is growing, stagnated or declining. This can be gauged using the market capitalization number of participants and quantum of funds flow and instruments.
By this it is therefore evidenced that the sharp fall in the market capitalization, number of deals and the all share index is as a result of the NSE crisis.
It can be observed form the points highlighted above that it is not an overstatement to say that a healthy capital market is a catalyst to a country's economic survival and development (Nwude, 2003). The motivating factors for investment in the capital market can be returns in form of dividend, interest, capital appreciation, membership of board of directors for control of an enterprise and to forestall fund idleness to take advantage of time value of money.
Therefore, any attempt to allow crisis in the exchange will have far -reaching repercussion on the investors' confidence and the economy as a whole.
Peter S. Rose (1994), Money and capital market financial institution and investments in global market places, New York, Addison Wesley, pp 628-635.
New York institute of finance (1992): guide to investing Simon and Schuster Inc.
F. E Armstrong (1993): "the capital market operations (seminar presented in UNEC 21st March 1993).
Aliele and Anao (1986): the Nigerian stock exchange market in Operation. Jen Meviho and Associate Ltd.
Okafor F. (1999): Investment Decisions: Evaluation for Projects and Securities London Cassel ltd.
Ndi Okereke - Onyiuke (2010): "Overview of the Nigerian capital market (seminar presented in UNEC June 2010).
Oladego, R. (2003): "Exploring capital market opportunities", business times, an h6 - 12, 2003 P. 30.
Persuade, B (1990): the guide to investing in emerging securities market. Euromongy publication Plc.
The Guardian newspaper Sunday, August 8, 2020 p. 14.
Onosoda, G. O (2001): "Conflict of interest in corporate governance, " business times, DCC 3-9 2001. p. 17.
Financial times magazine June 23 2008 p. 18
Singleton - Green B. (2008): "10 ways to restore shareholders faith". Accountancy, April, 2010 p. 9.
Agbana, G (2009): "footpath to capital marketpetitiveness engages stakeholders". The Guardian, Sept 19, 2009.p14
Daily sun Newspaper Monday, august 23, 2010. p. 38 business world Monday, august 16, 2010. p. 32.
Hylbert R. C (2008): "Investment opportunities in times of financial crisis". The wall struck journal. 2008.
Evelyn Oputa Berume (2009): "Insider dealings facts dangers and precautions. Cheedal press ltd.
Chuke Nwude (2003): "Basic principles of financial management: A second course". Chuke Nwabude Nig, Enugu.
This chapter will focus on the procedures for collection and analysis of data. Having reviewed the related literature on the impact of the NSE crisis on Nigeria capital Market, the research's attention will now move to the methods of data collection and analysis called Research Methodology.
Research Methodology according to Baridanm (1990:20) should provide a detailed account of methods used in collection of data, why those methods were chosen and not others, what data were obtain and how they were analyzed.
The researcher employed various methods and procedures to achieve the objectives of the research. The researcher obtained information from both primary sources and secondary sources. Primary sources include Oral interview and administration of questionnaires. Secondary sources which are the desk research include materials obtained from journals, newspapers, annual reports, magazines, seminar paper, unpublished thesis, internet and news from electronic media.
The data collated were put into useable form through editing, tabulating and analysis. In editing, non relevant data were discarded and the relevant data were tabulated so that statistics could be developed from them. The data collated were subjected to analysis and the research formed interpretation from the result
The Research used both primary and secondary sources.
Primary data were gathered by the researcher through personal observation, Oral interview and administration of questionnaire. The questionnaire contained several structured questions to probe in to the research problem.
Secondary data also known as desk research was used. The researcher got information from Newspapers, internet, Annual reports, Seminar papers, journals and like news from electronic media.
This refers to the research instruments used by the researcher to collect whatever data was needed. The research instruments used in this work include; questionnaire, interview schedule, and desk research.
The questionnaire permits wide coverage for minimum expenses. It researches to people that would have been hard to contact especially since most of them were sent through E-mail to respondents. It also afforded the respondents more adequate situations in which to check options. The interview schedule was toplement the questionnaire and help to secure information which the researcher found useful inpleting research work and also the persons interviewed provided useful and viable suggestions how to manage the NSE crisis.
Desk research enabled the researcher to know the actual situation of events byparing figures of past in the present periods and it is also objective and permitted a more accurate generalization.

In determining population size, the researcher has to adopt the stratified deliberate sampling method. This method was chosen because of the heterogeneous nature of the population which includes staff of quotedpanies, stockbrokers and the general investors.
In effect, it is not possible to collect information from all possible respondents, Stock broking firms were chosen represent the registered dealing members in the NSE while Fifty (50) individual investors (share holders) were chosen to represent all other investors.
Percentage of population
Sample size
In the determination of sample size, some stockbrokers and investors were interviewed, including the circulation of questionnaires to 50 stockbrokers and investor respectively. The sample size is shown below. 3.7 SAMPLE PROCEDURE
In the process of carrying out research of this sort, aprehensive information that will help onee up with a concrete result with relevant references to the study has to be built up. To this end, a decision has to be made on whether such information will surface from all the sample population. In respect to the study, a sample of the population was adopted to enable the researcher quickly get at them.
Also interviews were conducted, categorically with officials of stock broking firms and few individual investors under the Sample Size.
Questionnaires were distributed to the sample population. With that, the researcher gained quicker response.
In administering the questionnaires, hand to hand approach has to beadopted.
The researcher adopted this method for quicker response and to ensure prompt return or accountability, Equally, Some questionnaires were E-mailed to respondents due to their location and importance of their contribution to this research.
For instance, one hundred (100) questionnaires were administered both physically and electronically. Out of one hundred (100) questionnaires representing one hundred percent (100%) of distributed questionnaires, eighty five (85) questionnaires were returned and received representing Eight five percent (85%) of the distributed questionnaires which evidently is a favorable response rating.
The rule state that data collected from the secondary sources will be affected to the "Impact of the Nigerian Stock Exchange Crisis on Nigeria Capital Market".
In view of the decision rule of data collected through questionnaire responses and personal interview questions, the hypotheses were first tested, after which other additional data were analysed.
Some of the decision rules techniques applied are as follows;
Many records are maintained for the past and ongoing activities of the Nigerian Stock Exchange and these often provide data for analysis.
It is in line with this that the crisis in the NSE was analyzed.
TABULATION; The data from the two (2) Sets of questionnaires i.e. to stockbrokers and shareholders were separately tabulated to present a summary of all the responses to each major research question to aid the hypothesis testing.
The tables for each group of respondents were separately presented, this enable easy assessment of the majority response to each research question.
Percentage (Module Response): Responses to the questionnaires were decided on percentage basis.
A percentage of each of the alternative response was calculated against the total responses for each major research question.
This enables the researcher to determine the model to each question by each of the group of respondents in order to make aparative analysis and select the alternative with highest percentage.
Since two (2) separate groups of responses were decided and analyzed, the (mean) percentage of all response to avoid the selection of any biased opinion.
The percentage responses from stockbrokers and investors werebined and this means percentage calculated. The alternative with the highest mean percentage of response were chosen as either confirming or nullifying the null hypothesis.
Baridman D. M (1990) " Research methods in administrative sciences". 2nd edition. Bark publishers. Port Harcourt pg 20.
Ezejunlie C and Ogono (1990) "Basic principles in managing research projects", Onitsha, Africana publisher p. 30-32.
Ikeagwu E. K (1998) "Groundwork of research methods and procedures". IDS Publishers, Enugu p. 171.
Unamaka P. C and Chukwu (2002) "Analytical management" scenti publishers, p. 51 - 61.

Data presentation and analysis
4.1 introduction
Data collected in any research work are of no use to anybody until they are analyzed using statistical techniques. In this chapter, the researcher analyzed both the data collected through the administration of questionnaires and data collected through desk research.
The analyses were designed to observe whether the hypothesis formulated should be accepted or rejected. Acceptance or rejections were based on a certain level of confidence (90%).
A number of one hundred (100) questionnaires were distributed as follows: stock brokers (50) and investors (50). Out of the 100 questionnaires distributed, forty three (43) were filed and returned by investors while forty two (42) were filled and returned by stockbrokers.
No distributed
No returned
% of refund
Stock brokers
Out of 100 questionnaires distributed, 85 were filled and returned representing 85% of distributed questionnaires. the 15 unreturned represents 10% of all distributed questionnaires.
Distribution according to sex
No of respondents
The male represents 72% (61 respondents) while the female represents 28% (24 respondents) of the entire respondents.
Distribution according to employment
No of respondents
Self employed
Distribution according to age
Under 30yrs
31-35 yrs
36-40 yrs
41 - 45 yrs
46-50 yrs
50 - above
From the above table, majority of respondents are those in their early thirties followed by those in their late thirties with 34% and 27% respectively. 18% of all respondents represent those below 30 years whole 13% represents those in their early forties.
4.3 hypothesis testing
The four (4) hypotheses used in this study are hereby separately tested for acceptance or rejection as follows:
4.3.1 testing hypothesis 1
Manipulation of share prices
H0: Manipulation of share prices does not significantly affect
the market.
Research question: Would you say that manipulation of share prices has any significant impact on the capital market? (Question 9 of questionnaire).
Stock brokers' response
Number of response
May be
As shown in the above table 31 respondents or 74% of 42 stockbrokers agree that manipulation of share prices impact on the capital market. 6 respondents or 14% of stockbrokers disagree with the question while 5 respondents or 12% of 42 stockbrokers are not sure of the answer.
Investors' response
No of respondents
May be
From the above, it is obvious that 28 respondents or 65% of 43 investors agree that manipulation of share prices could affect the market, while 8 respondents or 19% of respondents disagree.7 respondents or 16% of respondents could not from an opinion.
Mean (x)

74 + 65%
14 + 19%
May be
12 + 16%
It can be seen from the above calculation that on the average, 69.5% of the respondents answered "yes" while 16.5% answered "no" while 14% gave no certain response.
From the table of responses above - both stockbroker Stephen Udeh Njoku is an endearing young man who believe in the mind power. what you think constantly is what you end up becoming. He is involved in training youths to tap into their potentials by using their minds-Peculiarmindset!

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