The origins of the Nigerian Capital Market date back to colonial times when the British Government ruling Nigeria at the time sought funds for running the local administration. Most these funds derived from agriculture, produce marketing and solid mineral mining. Discovering that these sources were inadequate to meet its growing financial obligations, the colonial administration decided to expand its revenue base by reforming the system of revenue mobilization, taxation and other payments. It also saw the need to raise funds from public sector to cover temporary shortfalls in funds availability. Hence, it found it necessary to establish a financial system by setting up the basic infrastructure for its take off pending the development of an organized private sector.
According to Odife (2000:6), the first step in this direction was to secure the necessary finance for the development of this infrastructure and long-term capital project. This it did in 1946 when it promulgated the 1946 10-year plan Local Loan Ordinance for the floatation of the first N300,000, 3% Government stock 1956/61 with its management vested on the Accountant-General.
In 1957, the government and Other Securities (Local Trustees Powers) Acts was enacted. This law specified the types of securities in which trust funds may be invested. It also clearly defined the powers and responsibilities of trustees. In addition, the colonial government set up the Professor Barback committee to examine the ways and means of fostering a share market in Nigeria. Part of the terms of reference of this committee included the possibility of establishing a capital market in Nigeria. The committee recommended, among others, the creation of facilities for dealing in shares , the establishment of rules regulating share transfer and measures for encouraging savings and issues of securities of government and other organizations.
By the end of the year (1957), the colonial administration had promulgated the General Loan and Stock Act and the Local Loan (Registered Stock and Securities) Act on the recommendations of the Barback Committee.
In 1958, the Central Bank of Nigerian was established through the Central Bank of Nigeria Act of 1958. The purpose of these various legislations was to establish the legal and infrastructural frame work for the take off of a viable securities/capital market in Nigeria. As a follow up to these laws, the colonial administration issued the first N2 million Federation of Nigeria Development Loan Stock in May 1959.
In 1959, it also enacted the Statutory Corporations (Guarantee of Loans) Act. In April 1960, the Central Bank of Nigeria issued the first Nigerian Treasury Bills which were meant to provide an avenue for the investment of short-term liquid funds in Nigeria and assist in providing government with funds pending receipt of its own revenues.
On September 15, 1960, the Lagos Stock Exchange was incorporated as a private limited liability company, limited by guarantee under the provisions of the Lagos Stock Exchange Act 1960. The Lagos Stock Exchange Act 1960 conferred monopoly powers on it members to deal in securities granted quotation on the Exchange. It also allowed the Central Bank to Deal directly in securities. On June 5, 1961, the Lagos Stock Exchange opened for business with 19 listed securities made up of 3 equities, 6 Federal Government Bonds and 10 industrial loans…
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