Lesson Notes By Weeks and Term - Senior Secondary 3

Term: 1^st Term

Week: 5

Class: Senior Secondary School 3

Age: 17 years

Duration: 40 minutes of 2 periods each

Date:       

Subject:      Home management

Topic:-       Capital market

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

:

1 Explain the meaning of capital market

2. State the guidelines for capital market
3. Describe capital market investment opportunities

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

NOTE

CAPITAL MARKET

The capital market is made up of financial institutions which deal in long term financing.

The capital market provides medium and long-term loans for investment. They therefore, bring long-term lenders and borrowers together. Loans given are usually for more than two years.

INSTRUMENTS USED IN CAPITAL MARKET

Instrument 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, stocks and shareholders receive dividend as a reward for contributing the money in running of the business.

INSTITUTION INVOLVED IN CAPITAL MARKET

1. Insurance companies
2. Issuing houses
3. Development banks
4. Investment bank
5. Building societies or mortgage bank

FUNCTIONS OF THE CAPITAL MARKET

1. Provision of long-term capital to investors both in the public and private sectors
2. Provision of long term investment opportunities from which income may be earned
3. Mobilisation of savings for investment
4. Encourage the growth of merchant banking
5. Provision of investment advice
6. Provision of opportunity to the public to participate in running of the economy.

What does one buy in the Capital Market?

Shares and bonds are the most common products to invest in capital markets.

1. Bonds 

A bond is a debt. When you buy a Treasury Bond issued by Government you are a lender and the Government is a borrower. Equally, when you buy a bond issued by a company, the company is a borrower and you are a lender. The bonds will promise to pay you an interest income periodically.

2. Equity/Shares

A share is a unit of ownership in a company. When you buy a share in a company, you become one of the owners of the company to the extent of your shareholding. You participate in the affairs of the company through your voting rights at the General meetings. When the company reports profits and decides to distribute the profits, you are paid a dividend income.

GUIDELINES FOR INVESTING IN THE CAPITAL MARKET
1.    Research and decide on a preferred stockbroker
A stockbroker is an appointed agent who is authorized to execute, buy or sell instructions on an investor’s account. Within the purview of the Nigerian stock market, a stockbroker will refer to a broker-dealer firm that is a dealing member of the NSE, and is registered with the SEC.

In deciding a stockbroker important factors to consider include their ease of access, their affordability (since some firms place a minimum amount for opening an account), their integrity/reputation, and their status (active or inactive) with the NSE/SEC.

A list of stockbrokers and their contact details including their corresponding transaction fees will be provided in a subsequent article.

2. Register with your chosen stockbroker
   To register with a stockbroker, clients have to fill the registration form issued by the broker (either online or manually) and provide KYC (know your customer) documents namely;

•  Means of identification (PVC, National ID, Driver’s License or International Passport), 
  •    Proof of residential address (bill or receipt no later than 3 months), 
  •    Passport photograph and electronic signature (if filling the form online). 
  For non-Nigerian residents, notarized means of ID and proof of residential address will be required.

To participate in the NSE, all investors have to be registered on the CSCS (Central Securities Clearing System). CSCS Ltd is an associate company of the NSE. The system is an electronic database that records ownership of Nigerian securities. On registration, the systems assigns you an account number that will accompany every Nigerian stock trade you execute.
Opening an account on the CSCS is done through the platform provided by your stockbroking firm (typically, stockbrokers update client registration on their platforms, automatically in the CSCS registry).

3. Fund your account and start trading
   Your stockbroker will provide you with their bank account details and they will fund your account as soon as any payment you make is confirmed.  All transactions with the exchange are executed by your stockbroker. This can happen in one of two ways.

  a. You can send trade instructions to your broker, usually by mail.
  b. Some brokers provide online trading platforms that allow you exectute transactions yourself

OPPORTUNITIES AVAILABLE IN THE CAPITAL MARKET

The Capital market is a market for buying and selling medium to long-term securities (i. e. ordinary shares, preference shares, bonds and debentures).

The capital market also provides for indirect investments in securities through products offered by Collective Investment Schemes (CIS). For businesses and governments to do well and prosper, they require stable source of long term funds which is not available in the money market (the banking system). For instance, businesses need to expand their factories to remain competitive, and governments need to provide such socio-economic infrastructures as roads, rails, hospitals, schools, bridges etc to be relevant. Only a vibrant capital market can provide this type of long term funding.

The Nigerian capital market is an integral part of the Nigerian financial system. Other sectors of the Nigerian financial system include: the money market, the insurance market and the pensions. Each of these markets has a statutory regulatory institution namely: CBN, SEC, NAICOM and PENCOM for the money, capital, insurance and pension markets respectively (see the chat below). These regulatory institutions are empowered by statutes (laws) to supervise the various markets and facilitate the exchange of funds between the surplus and deficit units

EVALUATION:    1. Define capital market

2. Outline the guidelines involved in investing in the capital market
3. What are the opportunities available in the Nigerian capital market?

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively