Stock exchange market is a highly organised market where investors can buy and sell existing securities like shares, stocks, debentures, etc. This is a market where those who are interested in purchase of securities are brought into contact with the sellers. The stock exchange is an essential part of the capital market to serve as a source of raising capital as well as a forum for financial investment. The market deals in old existing shares only, i.e. new ones are not traded in it. The stock exchange market ensures that every transaction must follow prescribed set of rules and regulations, which are complex in nature. Quoted companies are organisations whose shares are quoted on the stock exchange market. The Nigerian Stock Exchange Market is in Lagos with branches in Abuja and Port Harcourt. It was established in 1960 through the Act of Parliament. Some of the companies quoted on the stock exchange market include Dunlop Nig. Plc ., Access Bank Plc ., First Bank of Nig. Plc ., Zenith Bank Plc ., guinness Nig. Plc ., UTC Nig. Plc. and Longman Nig. Plc.   Importance of stock exchange An avenue for raising capital: Capital can be raised by companies and governments through the stock exchange. Provision of employment opportunities: The stock exchange provides employment for brokers, jobbers, clerks and others. Provision of information to investors: Investors, especially foreign investors, can obtain necessary information about the investment situation of a country. Facilitates transfer of investment: An investor can withdraw his investment from a company to invest in another company. It is a market for investment: The stock exchange provides an avenue for people to invest in any sector of the economy. It provides yardstick for measuring performance of companies: The price quoted can be used to measure performance of a business as only sound and efficient companies are quoted on the stock market. It leads to increase in the standard of living: Investment opportunities will lead to more income, which will affect consumption, thereby increasing the standard of living of the people of a country.

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Capital market is a market for medium-term and long-term loans. The capital market serves the needs of industry and the commercial sector. It comprises all the institutions which are concerned with either the supply of or demand for long-term capital.   Instruments used in capital market Instruments used in capital market are mainly stocks and shares. Stocks and shares are securities purchased by individuals, which is an evidence of contributing part of the total capital used in running an existing industry. At the end of a normal business year, stock and share holders receive dividend as a reward for contributing the money in running the business.   Institutions involved in capital market Institutions involved in capital market include: Issuing houses. Insurance companies. Development banks. Building societies. National Provident Fund (NPF). Stock Exchange.   Advantages of capital market Provision of long-term loans: Capital market provides long-term loans to the private and public sectors for investments. Mobilisation of savings: Savings are mobilised in the capital market. Growth of merchant banks: The existence of capital market helps the growth and development of merchant banks. General running of the economy: The existence of capital market encourages the general public to participate in the running of the economy of the country.

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Money market can be defined as a market for short-term loan. The market consists of institutions or individuals who either have money to lend or wish to borrow on a short-term basis.   Instruments used in the money market Treasury bills: Treasury bill is normally issued by the central bank of a country, which assists the government to borrow money from the money market on short-term basis. Bill of exchange: Bill of exchange refers to a promisory note which shows the acknowledgement of indebtedness by a debtor to his creditor and his intention to pay the debt on demand or at an agreed time in future, normally ninety (90) days. Call money funds: The call money fund or market is a special arrangement in which the participating institutions invest surplus money for their immediate requirement on an overnight basis with the interest and withdrawal on demand. The call money has an advantage of early return and at the same time are withdrawable on demand. It provides solution to the immediate stock of liquidity pressures in the money market.   Institutions involved in the money market Institutions involved in the money market include: Central bank. Commercial banks. Acceptance houses Finance houses. Discount houses. Insurance companies.   Advantages of money market Provision of finance: Money market enables entrepreneurs and investors to raise enough finance through borrowing to run their businesses. Creation of extra income: The money invested in money market is capable of yielding extra income in form of interest. Promotion of economic development: Economic growth and development is enhanced through borrowing from money market. Ability to recall invested funds: Funds invested in the money market are very easy to recall. It enhances savings: Money market provides opportunity for those having surplus fund to invest thereby enhancing savings.

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The traditional financial institutions came into existence several years before the establishment of modern banking system in many countries in the West African subregion. It involves the coming together of a group of people with common interest in the same place of work or community who mutually agree to pool their resources together in order to save, lend and manage money. These traditional financial institutions usually take the form of cooperative societies known as credit and thrift co-operative societies, which are given different names in different places, e.g. “ESUSU” or “NSUSU” in Yoruba, or “ETIO-UTU” in Igbo. It takes the form of association of people in the village, office, market, etc. who have mutually accepted to pool their resources together so as to save, manage and lend such money to its members when the need arises.   Functions of traditional financial institutions It encourages savings: Members, through the pooling of their resources together, are encouraged to save. Assists members to borrow: Members who are in need of money for whatever reason are permitted to borrow. It ensures proper management of funds: The saving and lending of funds to members assist the institution to manage their funds properly. Promotion of investment: Traditional financial institutions may decide to invest in viable businesses that can yield profit to the organisation. Assistance to members in time of need: Traditional financial institutions can assist members when they are in financial difficulties.



Insurance companies are financial institutions that are concerned with insurance. Insurance may be defined as a contract between an insurer and an insured, under which an insurer promises to indemnify (compensate) the insured against loss, which he may suffer in future, upon the payment of a premium. It is a provision made by an individual or an enterprise against the occurrence of some future loss. There are certain risks which can be insured against. Examples are risks of fire, burglary or theft, accident, loss of goods in transit, untimely death and bodily injury to factory workers.   Examples of insurance companies in Nigeria are: Reinsurance Corporation of Nigeria National Insurance Corporation of Nigeria (NICON) Industrial and General Insurance (IGI) Custodian and Allied Insurance Nig. Ltd. Lion of Africa Insurance. Amicable Insurance.   Functions of insurance companies It facilitates international trade: Insurance stimulates and facilitates international trade. This is because marine policy, for example, provides cover for cargoes and vessels. The export credit guarantee also guarantees credit sales. It offers investment opportunities: Insurance makes funds available for investment. A large proportion of these resources are invested in the capital market, where businessmen can obtain loan. This helps in developing the country’s economy. It leads to risk reduction: Insurance helps to reduce or control loss or liabilities of a businessman. It spreads the financial losses of the insured. Provision of security: Insurance provides security to commercial activities. Some small enterprises would have collapsed as a result of major losses, but insurance always takes care of such uncertainty. Provides a means of savings: Insurance companies provide a means of saving regularly, which will help to provide for the future, e.g. endowment policy. It serves as collateral security: Life assurance policy can be used as a collateral security to obtain loan from the bank for business investment. Motivation of workers: Through group insurance policy, the workers are fully aware of a secured future; hence they will work harder, which will bring about higher productivity. Provision for old age and disability: Life assurance can be used as a way of providing for old age and to make provision for permanent disability.

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