CHAPTER ONE
INTRODUCTION
1.1. BACKGROUND OF THE STUDY
The precise meaning of economic development has been debated: whereas economists in the twentieth century focused primarily on economic growth, sociologists focused on broader processes of change and modernization. Economic development is defined by Karl Seidman, a development and urban studies scholar, as "the process of generating and employing physical, human, financial, and social assets to generate enhanced and broadly shared economic well-being and quality of life for a community or region." Economic development, according to Daphne Greenwood and Richard Holt, is defined as a "broadly based and sustainable increase in the overall standard of living for individuals within a community," whereas measures of growth, such as per capita income, do not always correlate with improvements in quality of life.
When a firm needs to raise funds for future expansion or the establishment of a new business endeavor, it must either accept a loan from a financial institution or issue shares on the stock market. In reality, the stock market is the principal source of capital for any firm looking to expand. It is the most essential factor in the country's industrial and commercial development. As a result, a rising stock market is an indicator of a thriving industrial sector and a country's increasing economy. The stock market's secondary duty is to serve as a common platform for buyers and sellers of stocks listed on the stock exchange. It is the stock exchange's secondary market, where retail and institutional buyers purchase and sell equities. In fact, it is these stock market traders who invest in equities to raise funds for firms. Investing in stocks or trading in stocks requires the use of stock market brokers. To keep stock trading alive, brokers actually execute the buy and sell orders of investors and settle the deals.
A stock broker is a company or someone who acts as a middleman in stock market transactions, providing investors with a number of services in addition to investing advice and executing buy and sell orders on their behalf. For its services, the stock broker charges a commission to the consumer. The stock brokering role is enormous, as it serves as the single barrier between the stock exchange and the investor. There are numerous stock brokerage firms in the country that provide a variety of services to their clients.
Brokers are commission-based agents who execute orders on behalf of clients on the floor of the Exchange. The commission paid is usually a set proportion of the total amount paid for the order. (Tajudeen,2018:41). According to James and Henry (2015:48); Okafor (2016:88), the brokerage function is highly specialized on mature stock exchanges where transaction volume, value, and frequency demand a rigorous division of labor. The tight division of labor is not observed at the Nigerian Stock Exchange, which is still a developing market, owing to what analysts refer to as the "double capacity system." The double capacity technology allows both broker and jobber operations to be combined. Okafor (1996:91) observes that this is "the prevailing six system in developing nations because market volume may not justify functional specialization."
There is a financial system in every economy that is responsible for managing the society's financial environment by determining the types and uses of funds to be issued, as well as the sources of funds to be put. Money and capital stock markets are the two key marketplaces that make up the financial system. The many market is a market for short-term funds and securities, such as treasury bills, treasury certificates, commercial paper, and other short-term funds with a tenure of less than a year. Thus, the goal of the regulating bodies, such as the Nigerian Stock Exchange Commission (SEC), is to promote the development of an orderly capital market, to have authority over its members (stock broking firms), to establish rules of ethics to guide their professional behavior in the course of performing their functions, and to raise public awareness. Stocks were created to allow businesses in need of long-term funding to sell sections of their stock equity securities in return for cash. Other than issuing bonds, this is the most common means of acquiring capital for a corporation. These corporations' stocks, which they must all issue, are said to be publicly held when they are owned by the general public, which includes both private investors and institutions. These publicly owned shares are said to be liquid since they can be easily traded (sold) to other investors on the stock market. Stock breaking companies typically operate as middlemen in transactions, purchasing new securities from issuers at wholesale prices and then reselling them to the general public at retail prices which in turn boost the economy.
Stock brokers play an important function as an economic organization that improves capital formation and allocation efficiency. Stockbrokers' efforts assist firms and governments to raise long-term money, allowing them to fund new projects and expand other operations, resulting in economic growth and development. In this way, “Alile” (2016) noticed that when capital is delivered to productive economic units, the economy performs better. Furthermore, as economics evolves, more funds will be required to meet the rapid expansion, and the stock market will act as an ideal mechanism for mobilizing and allocating savings among competing uses that are vital to the economy's growth and efficiency. This light, which stock brokers emit, serves as a barometer for economic performance in the sense that it aids in the allocation of capital required for an economy's steady growth. Therefore the study centers on stock brokers and economic development in Nigeria
1.2 STATEMENT OF THE PROBLEM
Currently, stock broker activity in the stock market has increased by 118 points, or 7.3 percent, in the last month. Since 2013, the Nigerian stock market has averaged 1106 index points, with a high of 1718 index points in May 2013 and a low of 848 index points in December 2013. The steady disintegration of the stock market has been caused by the rise and fall of stock broker operations in the Nigerian stock market index point. The stock market's collapse might throw the Nigerian economy into disarray.
According to a study from the Nigerian Stock Exchange, the process of this rise and collapse began in January 2017, when stock market activity plummeted from an all-time high of $13.5 trillion to less than 4.6 trillion by the second week of January. In the same time frame, the all-share index fell from 66,000 basis points to fewer than 22,000 points. It has also seen a free-for-all negative movement, with more than 60% of the 300 stocks traded falling.
As a result, many of the quoted stocks lack liquidity since their holders are stranded, unable to convert their holdings to cash to meet their domestic needs, posing a serious challenge. When this happens, investors remove their holdings and foreign investments are lost, resulting in a detrimental impact on the Nigerian economy. Therefore the study centers on stock brokers and economic development in Nigeria
1.3 OBJECTIVES OF THE STUDY
The central objective of this study is to analyze stock brokers and economic development in Nigeria. other specific objectives includes:
1) To examine Marketing Strategies Employed by Stockbrokers in Marketing Stocks in the Exchange Market
2) To examine the significant impact of stock market capitalization on economic development in Nigeria
3) To examine the significant relationship between stock market capitalization and economic development in Nigeria
4) To examine the factors to consider when choosing a stock broker
5) To recommend ways of improving the Nigerian economy through the activities of stockbrokers in the stock market
1.4 RESEARCH QUESTIONS
1) What are the Marketing Strategies Employed by Stockbrokers in Marketing Stocks in the Exchange Market?
2) What is the significant impact of stock market capitalization on economic development in Nigeria?
3) What is the significant relationship between stock market capitalization and economic development in Nigeria?
4) What are the factors to consider when choosing a stock broker?
5) What are the ways of improving the Nigerian economy through the activities of stockbrokers in the stock market?
1.5 RESEARCH HYPOTHESES
Hypothesis 1
HO: There is no significant impact of stock market capitalization on economic development in Nigeria
H1: There is a significant impact of stock market capitalization on economic development in Nigeria
Hypothesis 2
HO: There is no significant relationship between stock market capitalization and economic development in Nigeria
H1: There is a significant relationship between stock market capitalization and economic development in Nigeria
1.6 SIGNIFICANCE OF STUDY
This study would enable the researcher to pass their experience on the subject matter to
Stock market: This study will be relevant to stock brokers and the whole of the stock market because it tend to discuss the roles of stock brokers and stock market and how it can impact the economy in Nigeria
Policy makers: This serve as a yardstick and a guide for policy makers to carry out and make policies the will favor the economy through the stock market
Students: This study will serve as a medium for further research.
1.7 SCOPE OF THE STUDY
The study would cover stock brokers and economic development in Nigeria
1.8 LIMITATION OF THE STUDY
The researcher was faced with the following constraints in carrying out this study:
Time: The time within the researcher is too short to carry on the detail study on this topic.
Resources: Another constraint of the researcher is financial resources to carry on the detail study of this topic.Data: Another limitation to this study will be lack of data to make valid study on the research problem.
1.9 OPERATIONAL DEFINITION OF KEY TERMS
Nigerian stock exchange: The Nigerian Stock Exchange (NSE or the Exchange) was established in 1960 and now serves as the financial center of Sub-Saharan Africa's second largest country. The Nigerian Stock Exchange (NSE) is governed by the Investments and Securities Act (ISA) and is regulated by the Securities and Exchange Commission (SEC).
Stock broker: A stockbroker is an agent or firm that charges a fee or commission for executing buy and sells orders for an investor.
Stock market: The stock market is a set of markets and exchanges where regular operations such as buying, selling, and issuance of publicly traded company shares take place. Such financial transactions take happen on structured official exchanges or over-the-counter (OTC) marketplaces that are governed by a set of rules. In a country or region, there may be many stock trading venues that allow transactions in stocks and other securities.
Economic development: Economic development refers to initiatives, policies, and actions aimed at improving a community's economic well-being and quality of life.
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