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CAPITAL MARKET IN
NIGERIA, ITS EVOLUTION, FUNCTION AND IMPACT ON THE ECONOMY
CAPITAL MARKET IN
NIGERIA, ITS EVOLUTION, FUNCTION AND IMPACT ON THE ECONOMY
ABSTRACT
The effectiveness and
growth of capital market in Nigeria economy is a problem that has assumed of
recent an intractable dimension. The
concept market is one of the compartments of financial system that promotes
harm and investment in an economy. The
stock exchange market is one of the key institutions of the capital market, a
network or individuals, institution and instrument involved in the effective
channeling of funds from the surplus to deficit economic unit.
The question whether a
market undergone growth and development or not cannot be adequately answered by
simply ‘Yes or No’ there are some issues to be addressed.
The main purpose of
this study is to show how investors can dissever when a market has attained
growth and development for their top investors to know the correctiveness of a
price, which depends on the use of the information at time of the price
decision.
Finally the study is
designed to cover the practical and theoretical area of the stock market. The study is about the market and how
effective it is in setting prices, which reflect the worth of the securities,
traded in the market.
TABLE OF CONTETNS
CHAPTER 1:
INTRODUCTION
1.0 Background to the Study
1.1 Statement of research Problem
1.2 Objective of the Study
1.3 Research Question
1.4 Statement of the Hypotheses
1.5 Limitation and Scope of the Study
1.6 Justification of the Study
1.7 Research Methodology
1.8 Plan of Study
1.9 Definition of Terms and Concept
CHAPTER II:
LITERATURE REVIEW
2.0 Introduction
2.1 Concept of Capital Market
2.2 Role of Capital Market
2.3 Efficient Market Hypothesis (EMH)
2.4 Capital Market Development and
Successful Operation
CHAPTER III:
THEORETICAL FRAMEWORK
3.0 Introduction
3.1 Evolution of the Nigeria Capital Market
3.2 Structure of the Nigeria Capital
Market
3.3 Regulatory Body in the Capital Market
3.4 Instrument of Capital Market in
Nigeria
3.5 The Benefit to Companies in the SSM
3.6 Growth and Significant of the Capital
Market
3.7 Contribution of the Stock Exchange to
Capital Formulation
3.8 Problems of the Nigeria Capital
Market
3.9 The Impact of Liberalization policies in
the Nigeria Capital Market
3.10 Reform of the Nigeria Capital Market
3.11 Depth of market
CHAPTER IV:
METHODOLOGY AND
ANALYSIS
4.0 Introduction
4.1 Evaluation criteria
4.2 Data Presentation
4.3 Data Analysis
CHAPTER V:
SUMMARY, RECOMMENDATION
AND CONCLUSION
5.1 Summary
5.2 Conclusion
5.3 Recommendation
BIBLIOGRAPHY
APPENDIX
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND TO THE STUDY
The rate of economic
development of any nation is inextricably liked to the sophistication of its
financial markets.
Financial markets
assist the nation of the world to give the needed financial resources and
skills for growth and development.
Apart from promoting a
sound and efficient payments mechanism, the financial intimidation.
The financial market is
an institutional arrangement that facilities the intermediation of funds in an
economy. By financial intermediation, it
means mobilization of financial resources from surplus spending units and the
channeling of such to deficit spending units and the channeling of such funds
to deficit spending units for production investment and the generation of assets
or securities in the process.
Thus the financial
system generates a wide range of financial instruments (assets), which are
means of transferring purchasing power and are tailored to suit the time
preferences of both lenders and borrowers.
The financial market
performs an economic function by facilitating the transfer of real economic
resources from the lenders to the borrowers.
By the inducement of interest income, the market facilitates the
transference of purchasing power from the lender to the investor who wishes to
exercise demand over resources.
When the financial
market is efficient, funds flow freely and rapidly among its various sources
and uses. As long as financial
instrument remains substitutable for each other, changes in supply and demand
in the money market have a rapid over effect into the capital market.
Financial markets are
therefore constitutional whenever participants with aid of infrastructure
technology and over devises facilitates the mobilization and channeling of
funds into productive investments. The
importance of the financial market lies in financial intermediation to link the
deficit sector with the surplus of the economy.
In the intermediation process, financial intermediaries engage
principally in matching lenders and borrowers.
They bring savers and borrowers together by selling debt instruments or
securities and deposits to savers for money and lending that money to
borrowers. As a result, the lenders of
investors receive claims on investment, which have stable market value and high
liquidity.
Financial
intermediation does not ensure from direct lending and borrowing process but
arises from the lending-borrowing proves, which involves the generation and
exchange of debt instrument or securities.
The point of emphasis therefore is the financial intermediaries use
their own liabilities to create additional assets, help mobilize funds, gather
together to reap economics of scale and minimize the investors.
The financial markets
system features a wide array of banking and non-banking financial
intermediaries. The banking sub-sector
of the system comprises Commercial and Merchant Banks, Development Bank and
Central Bank, as the Apex institution.
The non-bank financial
institution sub-sector includes a wide range of organizations operating as
regulators, facilitators and investors.
The list includes the Securities and Exchange Commission Market in
Nigeria, to assess its impacts on Nigeria economy. In order to achieve its major (SEC), the
Stock Exchange, Stockbrokers, Regioners, Insurance companies, Pensions and
Provident funds and Investment Companies.
The financial market is
really segmented into two major markets, which are:
i. Money Market
ii. Capital Market
The money market is the
market for short-term funds an securities including treasury bills, treasury
certificates negotiable certificates of deposits, commercial paper and other
funds of less than one year duration on the other hand, the capital market is
the market for long-term funds and securities
whose tenure extends beyond one year.
These include long-term loans, mortgage, bond, preference share,
ordinary shares, federal government bonds and industrial loans.
The capital market is a
complex institution and mechanism through which intermediate and long run funds
are made available to government, business (firm) and individuals. The capital market therefore is an
instrumental arrangement that performs the function of mobilizing private and
public savings from surplus spending units and channeling them to the deficit
units for the production of goods and services.
Unlike the many money market which primarily exist as a means of
liquidity adjustment, the capital market provides a bridge of transforming
saving into long term investment by using equity bonds, debentures, mortgages
and investment stocks to facilitate intermediation.
The market makes it
possible for private and public sectors of the economy to rise long-term
capital to execute government development programmes and from the expansion and
modernization of the private business to enhance outputs, employment and
income. The capital market is often
described as an important part of country’s economy, which is indispensable to
economy growth and development. In
short, it is a place where nation’s wealth is bough.
The capital market
itself is composed of:
i. Primary Market
ii. Secondary Market
Operators in the market
include Merchant Banks, Stock broking Firms, Issuing Houses, Development
Finance Companies, the Central Bank, Securities and Exchange Commission and the
Stock Exchange. With this background;
this project attempts to review broad outline the extinction of the Nigerian
Capital market, its functions, growth and development with emphasis on the
period and challenge for the future especially in the lights of the liberalized
trade and exchange regimes adopted under the Structural Adjustment Programme
(SAP).
1.1 STATEMENT OF RESEARCH PROBLEM
The capital market is
the long-terms and of the financial market that is made up of market and
institution which facilitate the issuance of long term financial instruments.
Unlike the more market
that provides basically short term funds, the capital market provides funds to
industries and government to meet their long term capital requirements such as
financial or tried investments building, plant and machinery bridges and so on.
The following are
research problem.
i. Why is there still low level of
foreign investment in the market notwithstanding the reform?
ii. Is the capital market reform
impacting positively on the economy?
iii. Is there any on the securities of the
capital market attributed to the reform?
1.2 OBJECTIVES OF THE STUDY
The major objective of
this study is to evaluate the growth and performance of the capital market in
Nigerian to assess its impacts on the Nigerian economy.
The following are the
objectives of the study.
i. Examine the structures and the
roles of the capital markets in Nigerians and the
ii. evolution of the market including
institutional development market.
iii. Examine the instruments used in the
market and their used fullness.
iv. Examines the future prospect of the
Nigerian Capital market.
v. Find out the various problems facing
the workings and the operations of the capital market.
vi. To evaluate the impact of such reforms
on the Nigerian capital market.
1.3 RELEVANT RESEARCH QUESTIONS
i. What is the impact of the capital market
on the National Income?
ii. What is the effect of the capital market on
the share holder investment or in-course?
iii. What is the impact of the capital market on
the earning per shares (EPS) of the shareholders?
iv. What is the effect of the capital market
on the effectiveness: Development of the
institutional in the arrangement for long-term financial assets, such as
shares, debentures stock and mortgage equity bond.
1.4 STATEMENT OF THE HYPOTHESES
1. H0:
There is no relationship between Capital market transaction and long
term sources of funds.
H1: There is relationship between Capital market
transaction and long term sources of funds.
2. H0:
There is no relationship between investment in capital market and the
earning per share (EPS)
of the shareholders.
H1: There is relationship between investment in
capital market and the earning per share (EPS) of the shareholders.
1.5 LIMITATION AND
SCOPE OF THE STUDY
The Nigerian capital
market since its inceptions in 1946.
These will include involution and impact of the sector on the growth of
Nigeria economy.
Since early 70s and 80s
then it because a significant factors in financial system of the economy.
The study will further
examine its roles during the Structural Adjustment Programmes (SAP) and the
impact its plays in the dominance of the country financial base.
1.6 JUSTIFICATION OF THE STUDY
The importance of the
capital market in economic development cannot be over emphasized. There is consensus of opinion that the nature
and the content of the not benefit which the capital market offer country be
judged by the effects on the mobilization of
savings, capital inflow and out flow the mobility of investible surplus
funds, resources allocation, distribution of income and wealth and the response
of economic policies.
Therefore, the
development of the capital market should encourage efficient mobilization of
both domestic and foreign savings for productive investment in order to achieve
economic development. Without productive
investment, there will be no growth and saving and there will be no investment.
1.7 RESEARCH METHODOLOGY
This study will make
use of secondary data. The date at
sources from the various publications of the Central Bank of Nigeria (CBN) such
as B. Williams, Economic and financial Review, Annual Report and Statistical Bulletin:
Lagos Publication form the Nigerian Sick Exchange (NES), Securities and
Exchange Commission (SEC) and other Financial Institution.
1.8 PLAN OF STUDY
This study tells us
what the evolution functions and impacts of the capital market in Nigeria.
Chapter One is the
introduction and explains what capital market is all about. Chapter Two is the literature review and it
review the work of notable economists.
Chapter Three will be scope of the study and examines evolution,
operation and impact or the sectors on the economy. Chapter Four will be methodology and its
analysis is based on secondary data from central bank of Nigeria, Nigerian
stock exchange commission. Chapter Five
will be the summary recommendation and conclusion giving suggestion and ways to
improve the operation on the Nigeria capital markets.
1.9 DEFINITION OF TERM AND CONCEPT
1. Capital market: The market is concerned with the
mobilization and intermediation of long term funds.
2. Data Analysis: This refers to the use of data to
analysis the project work. This data
include in formulation got from official sources.
3. Methodology: This can be described as the method by which
this study will be carried out.
4. Equity:
This is the shareholder’s ownership interest in a company represented by
their common and preferred stock.
5. Operators in the Market: They are the players in the stock exchange,
this players include the financial intermediaries for statement long term fund
form investors and allocating some to institution that required them.
6. Securities: This can be defined as documentary evidence
of ownership or entitlement to part of the asset of the issuing organization
which may be a business, firm, government in government institution.
7. Secondary Market: This exists for the sale and purchase of old
securities.
8. Primary Market: This market is for new securities. It is platform where a company or government
raises funds for investment purposes.
REFERENCES
AROWOLE E. A “The Development of Capital Market in
Africa with particular reference a Kenya and Nigeria IMF Staff paper
(Washington) volume 2 July 1997.
NWANKWO G.O: Money and Capital Market in Nigerian
Today University of Lagos Press Page 16-135 1991.
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