ABSTRACT
The study examined the effect of
stock exchange performance on economic indices of Nigeria.. The specific
objectives were to examined the to determine the effect of All Share Index,
volume of traded shares and market capitalization on gross domestic product
(GDP) of Nigeria, too examine the contributions of All Share Index, volume of
traded shares and market capitalization on the Per Capita Income of Nigeria and
to evaluate the impact of All Share Index, volume of traded shares and market
capitalization on the National Debt of Nigeria. Secondary data was used for the
study and the data was sourced from Central Bank of Nigeria Statistical bulletin.. All Share Index, volume of traded shares and
market capitalization have positive and
significant effect on real gross domestic product e of the Nigerian
economy, All Share Index, volume of traded shares and market capitalization
have positive and significant effect on
per capita income of the Nigerian economy and All Share Index, volume of traded
shares and market capitalization have negative
and significant effect on National debt of the Nigerian economy. It was
recommended that Nigeria
government should take a decisive action and come up with good policies that
will assist government to curb the excessive of National debt in the country
TABLE OF CONTENTS
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
1.2 Statement of the Problem.
1.3 Objective of the Study
1.4
Research Questions
1.5
Research Hypotheses
1.6
Significance of the Study
1.7 Scope
of the Study
1.8 Operational
Definition of Terms
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 Conceptual framework
2.1.1 Nigerian Stock Exchange
2.1.2
The Role of the Nigeria Stock Exchange in Nigeria Economy.
2.1.4 The General Management and Control of the
Nigerian Stock Exchange
2.1.5 Problems Affecting Nigeria Stock Exchange
2.1.6
Stock
Market Performance on Economic Growth
2.2 Theoretical Framework
2.2.1
The Theory of Robert Solow
2.2.2
Innovative growth theory of Schumpeter
2.2.3
The classical theory of Economic growth
2.2.4
Big Push Theory
2.2.5
Efficient Market Theory
2.3 Empirical Review
CHAPTER THREE
METHODOLOGY
3.1 Research
Design
3.2 Area of the Study
3.3 Population of the study
3.4 Nature and Sources of Data
3.5 Method of Data Analysis
3.6 Model Specification
3.7 Technique for Analysis
CHAPTER FOUR
PRESENTATION OF DATA, ANALYSIS AND DISCUSSIONS
4.1 Presentation of Data
4.2. Analysis and Result
4.2.1 Descriptive Statistic
4.2.2: Regression
Analysis for Objective 1
4.2.3: Regression Analysis for Objective 2
4.2.4 Regression Analysis for Objective 3
4.3. Testing of Result
4.4. Discussion of Findings
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1. Summary
of Findings
5.2.
Conclusion
5.3. Recommendations
CHAPTER ONE
INTRODUCTION
1.1 Background to
the Study
A buoyant and dynamic
economy is the one built upon a sound financial system. Such financial system
should be stimulated and maintained by the effective activities of an efficient
capital market. The stock exchange therefore is the market where companies
raise capital on a short term and long term basis. This role of mobilization
and allocation of funds to every sector of the economy which made it (Stock
Exchange), the toast of investors has given it a pride of place in every
economy(Mohtadi
and Agarwal, 2001). There is no doubt, that the success or failure of every sector in the
economy rests to every large extent on its stock exchange market. This is
because for any sector in the economy to grow, an efficient means of capital
formation must not be ignored considering the importance of capital in any
organization setting.
Since the establishment of
the Nigerian stock exchange (NSE) some forty two years back (42) elements of
stagnation, dormancy and unproductiveness in the economy is being experienced
despite the tremendous development in the exchange systems. This situation has
taken a worrisome dimension in which many questions are being raised on the
relevance of the Nigerian stock exchange in facilitating investments in the
Nigerian economy(Osinubi, 2001).
There was no organized
financial market or institution in Nigeria prior to the establishment of the
central bank of Nigeria (CBN) by the Act of parliament in 1958. Consequently,
surplus funds of the financial system were invested abroad there by starving
the economy of the mush – needed capital for general development. But
immediately the central bank of Nigeria came into existence, the banks started
pioneering the development of Nigerian financial market comprising the money
market for short-term funds.
The development of the
Nigerian money market for short term funds started in 1960 with the issue of
the first Central Bank of Nigeria Treasury Bills. Subsequently, other
short-term debt instruments such as Treasury certificates, commercial Bills,
certificate of Deposits etc. were introduced by Central Bank to increase the
volume and depth of the money market.
The first attempt of developing the Nigeria capital market can be traced
to the year 1959, when the Central Bank of Nigeria floated the First Nigerian
Development loan stock on behalf of the Federal Government of Nigeria. The
capital market was divided into two (2) categories. The primary market which
deals in new issues and the secondary market which deals in old securities, all
in the stock exchange(Ezeoha, Ogamba and Onyiuke, 2009 and Ogunmuyiwa, 2010). In Nigeria, capital
market is regarded as the stock exchange because of the integral part it plays
in the stock exchange market. It is involved in many financial activities
around which all other operators in the capital market revolve one the other
hand, the capital market comprises of various participants and they are broadly
divided into four (4) categories, namely.
1.
The provider of funds for investors who could be individuals
unit, trust and other corporate bodies.
2.
Users of funds, which comprises of companies and the
government.
3.
interim diaries, facilities which includes stock broking
firm, issuing houses and registrar
4.
Regulators: These includes Securities and Exchange Commission
(SEC), the Nigeria Stock Exchange (NSE).
The stock market is an
economic institution, which promotes efficiency in capital formation and
allocation. The stock market enables governments and industry to raise long –
term capital for financing new projects, and expanding and modernizing
industrial / commercial concerns. If capital resources are not provided to
those economic areas, specifically industries where demand is growing and which
are capable of increasing production and productivity, the rate of expansion of
the economy often suffers.
Hence, the Nigeria Stock
Exchange (NSE), which constitutes the hallmark of the Nigerian capital market,
plays an important part in the economic life of the nation. Through its functions,
the stock exchange enables government and industry to raise long term capital
and finance developmental project and expansion and modernization of individual
and or commercial concern(Ogunmuyiwa, 2010).
The link between stock
market performance and the overall economic Performance and welfare has often
generated strong controversy among analyst based on their study of development
and emerging markets.Economic development is the increase in the amount of
people in a nation’s population with sustained growth from a simple, low-income
economy to a modern, high-income economy. Its scope includes the process and
policies by which a nation improves the economic, political, and social
wellbeing of its people. In pursuance of this,some major economic Indices used
for measuring economic performance would be examined. They include; Gross
Domestic Product (GDP), Gross National Product (GNP), National debt, Trade
balance, Credit rating and Distribution of wealth amongst others.
1.2 Statement of
the Problem.
It is sad to note that
despite the various functions of the Nigerian stock exchange, its performance
as well as its contributions to the development of the economy is not adequate
when compared with the investment made in the Nigerian stock exchange.
Sadly, it is widely
reported that the Nigerian Stock Exchange (NSE) has not contributed adequately
as desired to the development of the economy especially with regard to
investment in Nigeria this is due to certain reasons which include:
Low public awareness of finance
possibilities of the Nigerian stock exchange market, inadequate trading floor
to meet the demand of the public, poor infrastructure such as telecommunication
and electricity to facilitate its activities, High cost of transaction, lack of
venture capital and weak savings mechanism. The need to mobilize financial
resources by government cannot be over emphasized. And since experience in
Nigeria as well as other developing countries has shown that revenue from
taxation and statutory allocation alone are not sufficient to finance the
current and capital expenditure of most government of the federation(Ogunmuyiwa, 2010), It is along these that
efforts will be made in this study to bring to notice the validity of these and
other allegations levelled against the Nigerian Stock Exchange over the years(Emekekwue 2000).
1.3 Objective of
the Study
The broad objective of
this study is to determine the Effect of Stock Exchange performance on Economic
Indices of Nigeria. The specific objectives of this Study includes:
i.
To determine the effect of All Share Index, volume of traded
shares and market capitalization on Gross Domestic Product (GDP) of Nigeria.
ii.
To examine the contributions of All Share Index, volume of
traded shares and market capitalization on the Per Capita Income of Nigeria
iii.
To evaluate the Impact of All Share Index, volume of traded
shares and market capitalization on the National Debt of Nigeria.
The findings from the
study is hoped to assist policy makers to take appropriate action or decision
towards improving the activities of the stock exchange as well as in curbing
the problem facing the Nigerian stock exchange market.
1.7
Research Questions
This study will examine
the activities and performance of the Nigerian stock exchange with the aim of
finding out the extent to which it has contributed to the development of the
Nigerian economy especially in facilitating investments opportunities. The
following questions are therefore raised to guide the study.
i.
Whateffect does All Share Index, volume of traded shares and
market capitalization have on gross domestic product (GDP) of the Nigerian
economy?
ii.
What contributions doesAll Share Index, volume of traded
shares and market capitalization have on the Per Capita Income of the Nigerian
economy?
iii.
What Impactdoes All Share Index, volume of traded shares and
market capitalization have the National debt of the Nigerian economy?
1.8
Research Hypotheses
1. HO= All Share Index, volume of traded shares and market
capitalization has no significant effect on gross domestic product (GDP) of the
Nigerian economy.
2. HO= All Share Index, volume of traded shares and market
capitalization has no significant effect on the Per Capita Income of the
Nigerian economy.
3. HO= All Share Index, volume of traded shares and market
capitalization has no significant effect on National debt of the Nigerian
economy.
1.9
Significance of the Study
The findings of this
research could be of tremendous benefit to relevant stakeholders in the
following ways:
Policy maker particularly
in the current effort to sensitize the capital market support and make it
viable as well meet international standard.
The economy and the
investing public would also benefit significantly from the result of the
investigation. Large number of Nigerians, though having huge sum of investigable
funds, are either completely ignorant or are not well informed about the
operation of the stock exchange. This study will serve as an adequate guide to
this effect
Prospective business
owners who are ready to operate their own enterprises but do not know where and
how to obtain additional funds to increase their operationswill be aided by
the findings of this research.
Lastly this study will
serve as a reference tool, for further researches, relating to this topic.
1.7 Scope of the Study
The study covers the
Nigerian Capital Market with emphasis on The Nigeria Stock Exchange as examined
as a whole with the Nigeria economy. It covers stock market performance indices
such as market capitalization, All Share Index, Volume of shares traded and
also, the market capitalization price viz – a –viz the Real Gross Domestic
Product, Per Capita Income and National debt as a proxies of the Nigeria
economic Indices. The scope of the study covers a period of ten (10) years,
from 2009 – 2018.
1.8 Operational Definition of Terms
The relevant terms which
are used in this research work that may be new to the reader are defined or
explained below.
a. FinancialSecurities:
These are written document or prints financial documents by which the claims of
a holder in specific properties are secured; they could be share, bonds and
debentures traded on the stock exchange.
b. Investment: The spending of money for purposes other than consumption
in order to earn income from it or to realize a capital gain at a later date.
It includes the purchase of stock exchange securities, government stock, life
insurance and policies.
c. Stock Exchange Market: A stock exchange is an organized market
were companies raise capital on a short and long term basis.
d. Treasury Bills: These are a 91 day maturity debt instrument issued
for raising short term finance by the government through the central bank of
Nigeria
e. Securities and Exchange Commission (SEC): This is the institution
that oversee the registration of all securities proposed to be offered for sale
to or for subscription by the public or to be offered privately.
f. Treasury certificates: These are medium term government securities
that mature after a period of one to two years and they are intended to breach
the gap between treasury bills and other long term government securities
g. Commercial Bills: These are short term financial instruments issued
on behalf of the company by an issuing house, usually a merchant bank.
h. Certificate of Deposits: These are short term financial instruments
issued by banks to investors with duration ranging from 90 days to one year.
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