I believe it (the Morgul blade/s) had the ability to turn whoever it wounded into a wraith, or thrall/slave of the Dark Lord... if a piece of it was left in that being. I think there was a mention of " a piece of the blade" had been left in Frodo. It worked like poison, towards the heart, spreading its poison.
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...why didn't the Nazgul go around stabbing random people...?
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For what purpose would that serve? They needed the Ring Bearer so they could get the One Ring for Sauron.
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But if it didn't make a new Nazgul then what the heck did morgul blades do?
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The Nazguls were the Nine mortal kings that had worn the nine Rings of Power that Sauron had given them. They weren’t created by means of “killing them with a morgul blade”. The purpose of the blades? Um, how about to kill their enemies?