This study examines the
impact of globalization and Nigeria’s Stock Market Growth in Nigeria. It also
determines whether the introduction of the automated trading system has any
significant effect on the stock market operation and it also aim to investigate
whether globalization of the stock market in Nigeria has attracted foreign
direct investment. The population of study consists of one hundred
questionnaires administered to the employees in the administration department
of the Nigerian Stock Exchange. The method of analysis used in the course of
this study was the chi-square method, which was used to test the hypotheses. Based on the tested
hypotheses, it was found that globalization has a significant impact on the
stock market operation in Nigeria. The study concludes that the Nigeria Stock Market has a brighter prospect
given to the recent policy direction especially the abrogation of laws that
hitherto hamper its effective and efficient functioning, the
internationalization, the improvement in the infrastructural facilities in the
market in line with what is obtainable in the developed market as well as the
present democratic dispensation will work individually and jointly to ginger
the prospect of the stock market. Finally,
it was recommended that government should play a more positive role in
order to foster Stock
TABLE OF CONTENTS
of Contents vi
Chapter One: Introduction
Background to the Study 1
Statement of Problems 5
Research Questions 7
Objectives of the Study 7
Statement of Hypotheses 8
Significance of the Study 9
Scope of the Study 10
Limitations of the Study 11
Definition of Terms 11
Two: Review of Related Literature
Concept of Globalization 18
Capital Market Operation-Historical Origin and Development 21
Stock Market Measures 22
of the Nigerian Stock Market 26
for Improved Performance of the Market 30
Direct Investment (FDI) in Nigeria 33
Casual Link between Globalization and Stock Market Development in Nigeria 37
Nigerian Stock Exchange and the Challenges of The Globalization 40
Three: Research Method and Design
Research Design 46
Description of Population of the Study 47
Sample Size 47
Sampling Techniques 47
Sources of Data Collection 48
Method of Data Presentation 49
Method of Data Analysis 49
Four: Data Presentation, Analysis and Interpretation
4.1 Introduction 51
4.2 Presentation of Data and Analysis 52
4.3 Hypotheses Testing 56
Five: Summary of Findings, Conclusion and Recommendations
5.2 Findings 65
5.4 Recommendations 67
to the Study
Globalization refers simply to the
universalization of concepts, movements, technology, market operations in the
context of a compressed world. A process by which the world becomes a single
place (Schotte, 2006; Monge, 2008). Furthermore, it is a process characterized
by increase in communication velocity, technological sophistication, economic
integration and ideological universalism.
Globalization is a fact of life because
all are affected by it in terms of its benefits or limitations, positively or
negatively. It is one of the tendons of our time eliciting fundamental changes
in the policy structure, management and growth in directions of organizations
and nations world-wide. In its broader terms, globalization refers to the fact
that frontier have ceased to be the barrier of economic growth.
Globalization is driven by advancement
in sophisticated telecommunication and technology, with the consequent
reduction in distance between economic agents making it possible for domestic
markets to emerge into a global system. In this context, globalization has
created variety of financial and investment opportunities, which many developing
countries like Nigeria have taken advantage of to secure susbstantial foreign
(bank) debts during the early 70s. The place of integration of world economy
has quickened considerably as a result of significant shift in the global
economy. With the collapse of communism, the global integration, particularly
in trade and capital flow has gained momentum. The world ideological partition
which earlier prevented integration between the major blocks, has given way to
more accommodating environment and opening up societies that were hitherto
closed (Monge, 2008).
Globalization in its own modern form
properly set root in Nigeria with British colonization and empire building. Since
the introduction of Structural Adjustment Program (SAP) in Nigeria, the
country’s stock market has grown very significantly (Alile, 1996; Soyode, 2010).
This is as a result of deregulation of the financial sector and the
privatization exercise, which exposed investors and companies to the
significance of the stock market. Equity financing became one of the cheapest
and flexible sources of finance from the capital market and remain a critical
element in the sustainable development of the economy (Okereke-Onyiuke, 2000).
The recent growth of stock market,
through increase in cross border capital movements has been attributed to the
removal of statutory restrictions on the capital account transactions and
economic liberation. IMF (1998) attributed another growth of stock market
globally to macro-economic stabilization and policy reforms in the developing
countries; privatization, liberalization of trade and growth of stock.
Similarly, the globalization of stock markets can also be attributed to the
spread of best practices in corporate governance, accounting rules, and legal
traditions (Feldestein, 2010).
According to Temitope, Oshikoya and Ogbu
(2000), the stock market is viewed as a medium to encourage savings, help
channel savings into productive investments, and improve the efficiency and
productivity of investments. The emphasis on the growth of stock markets for
domestic resource mobilization has also been strengthened by the need to
attract foreign capital in non-debt creating forms. A consensus has emerged in
recent times, which emphasized the critical role of stock market in the process
of development. It is a fat that globalization leads to transmission of liquid
it through savings, investments and productivity to the growth of stock market
(Akinola, 2003). Several research works has demonstrated, the need for stock
market to efficiently transfer funds for economic development (Magnus &
Wydick, 2002). Specifically, the role of stock market in economic development
cannot be overemphasized; the liquidity of stock (capital investment) has been
noted. Many profitable investments require a long-term commitment of capital
but investors might not want to tie up their savings for such long periods.
Until recently, Nigerian stock markets
have not performed impressively when compared to those in other regions of the
world. However, Nigerian stock exchange has experienced significant gains in
the entry of the new millennium: market capitalization and new listing no doubt
have increased. These changes have taken place within the context of
globalization and internationalization policies that reflect the effort of the
government to use stock markets as a means of privatization and engine growth
of the economy. Against this background, this study is designed to under-study
globalization and stock market growth in Nigeria.
The role of the stock market is to
mobilize saving and channel them to productive investments. But more
specifically, the stock market has the unique functions of intermediation of
the long end of the market. It provides long-term debt financing in long-term
assets. Also by providing access to risk capital and long-term financing, the
stock market helps to strengthen the financial structure of corporations and
improve the general solvency of the financial system.
Since a well developed stock market can
make available a wide range of financial instruments, it can thus improve
investment of higher return for a given degree of risk. Thus, through credit
allocation and investment function, a well developed financial market can help
to stimulate economic growth.
However, in the last few years, the
Nigeria economy and its financial system has been made so strong that it is
impervious to the negative externalities of the global financial crisis. The
recapitalization of banks, the inflation bubble in the stock market were quick
reference to the pillars that ensured the strength of the economy was regarded
as acting alone without exchanging anything with anybody. However, as the
recession in the Nigeria Stock Market became even more worrisome, the formal
admittance of the fact that indeed Nigeria is not a closed economy or isolated
economy as many people have been erroneously led to believe. Consequently, the
central bank faced the problem in equity market to the withdrawal of funds by
foreign institutions and private investors. This means that indeed Nigeria is
equally exposed. The present economic recession faced by Nigeria and Nigerians
have greatly affected the stock market growth in the economy. This constituted
a major problem for this study.
To authenticate the viability of the
proposed hypotheses of the study, the under stated research questions were
globalization of the central market (Stock Exchange Market) affect the
operation of the market operation?
the introduction of the Automated Trading System affected the operation of the
market in Nigeria?
the globalization of the exchange market affect foreign direct investment?
of the Study
The broad objective of the study is to
examine the impact of globalization on the Nigerian stock exchange market
operation. The specific objectives are;
investigate the impact of globalization on the Nigeria stock market operation
determine whether the introduction of the automated trading system has any
significant effect on the stock market operation.
investigate whether globalization of the stock market in Nigeria has attracted
foreign direct investment.
For an in-depth investigation and in
order to actualize the objectives of the study, the following hypotheses stated
in null and alternate formats were adopted,
HO: Globalization has no
significant effect on the Nigeria stock market operation.
HI: Globalization has a
significant effect on the Nigeria stock market operation.
HO: The automated trading system has no positive
impact on the globalization of the Nigeria stock exchange operation.
HI: The automated trading
system has a positive impact on the globalization of the Nigeria stock exchange
HO: Globalization of the
stock market has no significant effect on foreign direct investment in Nigeria.
HI: Globalization of the
stock market has a significant effect on foreign direct investment in Nigeria.
of the Study
After the completion of this research
work, the below parties would find it very useful.
Makers: The importance of knowing the major
globalization indicators that impact on stock market growth in Nigeria cannot
be overemphasized. This study is very important as it would provide suggestions
of how policy markers can manipulate trade liberalization, foreign private
investment, exchange rate disparity, foreign indebtedness, and inflation and
interest rate to the benefit of Nigeria stock market.
This study will also be useful to investors’ especially institutional investors
that consider global forces when investing. It will assist and provide a clear
explanation to investors on how globalization forces affect their investment in
(c) Researchers and Readers:
The study will provide information to researchers who would want to write
articles and working papers on the issue of stock market growth and
globalization. Readers who want to broaden their knowledge on the subject
matter would find it a dependable source of relevant information.
of the Study
The scope of this study is the Nigeria
stock exchange market and how its growth was affected by globalization. This
study encompasses the period before and during the advent of the global
financial crisis. Moreover, before the period of global financial crisis, the
Central Bank Governor made several pronouncements as how the global problem
would not affect the Nigeria economy due to adequate capitalization of the
economy. The recession witnessed in the economy, especially in the performance
of Nigeria stock exchange call for investigation.
of the Study
In the course of this study, the
researcher encountered problems which in one way or the other challenged the
easy flow of this work. These include;
Biasness on the respondents.
Lack of available information to be
obtained from the sample firms.
Some selected firms were used as case
study hence if the result is generalized, it may not reflect the true position
of other firms due to environmental difference.
In this study, the researcher made use
of some technical but related forms. For ease of understanding of these terms,
the following functional definitions were given:
i. Globalization: Globalization
is a process of integrating economic decision-making, such as consumption,
investment and savings across the world.
ii. Liquidity: Liquidity is
used to refer to the ability of investors to easily buy and sell securities
iii. Turnover Ratio: Turnover
ratio refers to an index of comparison for market liquidity rating and level of
The state or condition of yielding profit or gain. It is often measured by
price to earnings ratio.
The purchase of a financial product or other items of value with an expectation
of favourable future returns.