ABSTRACT
The research work is on the contribution of the
Nigerian Capital Market to the nations economic development and growth.
The research is aimed at the following:
a.
To demonstrate
that individuals and corporate participation in the Nigerian Capital market
will help in no small measure in the channelisation of long-term funds for
investment purposes within the economy.
b.
To demonstrate
the fact that the Nigeria
capital market is an economic institution with the sole aim of promoting
efficiency and discipline in capital formation and allocation for an overall
development and growth of the economy.
c.
Seeks to
demonstrate that with her better trained workforce via the acquisition of new
skills and technology, the Nigerian capital market is listed in some other
markets within Africa and is seriously
reaching out to other parts of the world thus attracting foreign investors and
injecting more funds into the system for productive purposes and economic
growth.
d.
While creating
a paying ground capable of ensuring honesty, transparency and fairness for
quality services that will enable more companies being listed for quotation on
the exchange; this no doubt, will engender wider private sector participation
and a boom to the economy.
e.
To establish
the fact that the Nigerian capital market stimulates industrial growth and
development in Nigeria,
and lastly to recommend steps based on the findings.
In the course of the study, the
following findings among others were made.
(i)
Following the
Federal Government recent reforms in reshaping the economy into something
better; especially in the financial and other sectors, such that banks and
non-banking institutions now rush to the Nigerian Capital Market to shop for
funds, thus boosting the market.
(ii)
These reforms
provided opportunities for the small companies to become quoted and have access
to funds in the capital market.
(iii)
It was
discovered that with the introduction of Structural Adjustment Programme (SAP)
and privatization exercise going on, the Nigerian Capital Market has facilitated the transfer of
enterprises from the public to private sector for a better restructuring and
management.
(iv)
That
internationalization of the Nigerian Capital Market has made possible
substantial injections which pumped up the volume of economic activities within
the country.
(v)
That despite
Government’s consistencies in her fiscal and monetary policies, Nigerian
Capital Market has recorded a total of N2.96Trillion and growth rate of over
35% over the past 12 years.
In conducting the research, frequency
tables, percentages and chi-square (X2) distributions were used as statistical tool.
In the end, summary, conclusion and
recommendations were drawn.
TABLE OF CONTENTS
Title page
Certification
Dedication
Acknowledgement
Abstract
Table Contents
CHAPTER
ONE
1.0
Introduction
1.1
Background of
the Study
1.2
The
Objective/Purpose of the Study
1.3
Significance of
The Study
1.4
Organization of
the Study
1.5
Statement of
Problem
1.6
Limitations of
the Study
1.7
Research
Questions
1.8
Research
Hypothesis
1.9
Definition of
Terms
CHAPTER
TWO: THE REVIEW OF RELEVANT
LITERATURE
2.0
Introduction
2.1
History
Development of Capital Market in Nigeria
2.1.1
The Structure
of the Nigerian Capital Market
2.1.2
Major
Participants in the Nigerian Capital Market
2.1.3
Regulatory
Bodies of the Nigerian Capital Market
2.1.4
Constituencies
of Nigerian Capital Market
2.2
Present Status
of the Industry
2.2.1
Policy
Objectives
2.3
Nigerian
Capital Market – Overview
2.4
Economic
Prospects/Potentials of the Capital Market in Nigeria.
2.5
The
Role/Functions of the Nigerian Capital Market
2.6
The
Constraints/Limitations of the Nigerian Capital Market
2.7
The Importance
of the Nigerian Capital Market
CHAPTER
THREE: RESEARCH METHODOLOGY
3.1
Scope of Study
3.2
Selection of
Data
3.3
Collection of
Data
3.3.1 Design
and Administration of the Questionnaire
3.4
Sample size
Determination
3.4.1 Sampling
Techniques
3.5
Operational Measures of Variables
3.6
Data Analysis
Technique
CHAPTER
FOUR: PRESENTATION OF ANALYSIS OF DATA
4.1
Presentation of
Data
4.2
Reliability of
Data
4.3
Analysis of
Data
4.4
Testing of
Hypothesis
4.5
Discussion of
Findings
CHAPTER
FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATION
5.1
Summary of
Findings
5.2
Conclusion
5.3
Recommendations
Bibliography
Appendix I - Questionnaire
CHAPTER ONE
1.0 INTRODUCTION
Mobilization of capital for National development has
long been the main focus of development economist. In this regards, the
desirability of savings and investment in economic growth has been given
considerable attention in various literature.
For sustainable growth and development, funds must
be effectively mobilized and allocated to enable businesses and the economy
harness their human, material and management resources for optional output.
Due to pancity in the provision of capital for national
development and growth, the Nigerian capital market is therefore concerned with
the channelization of long-term funds for investment purposes in the economy.
The stock market as an economic institution promotes
efficiency in capital formation and allocation. It enables government and
industries to raise long-term capital for financing New projects, and expanding
and modernizing industrial/commercial concerns.
Besides, if capital resources are not provided, to
those economic areas, especially industries. Where demand is growing (which are
capable of increasing productivity), the rate of expansion of the economy often
suffers.
According to Samuel (1996), developed economies had
been using money and capital markets in mobilizing funds for growth and development.
This is however not so in developing economies like ours where emphasis was
placed on money market, with little consideration for capital market – Nyong,
1997.
However, according to Akile, 1996, since the
introduction of Structural Adjustment Programme (SAP) in Nigeria, the
Nigerian Stock Market has grown tremendously. This is due to the deregulation
of the financial sector and privatization exercise, which compelled inventors
and companies to the importance of the Stock Market; equity financing became
one of the cheapest and flexible sources of finance from the capital market,
and remained a critical element in the sustainable development of the economy
(Okereke Onyinke 2000).
Besides, the determination of the overall growth of
an economy via the Stock Market activities depends largely on how efficiently
it performs it’s allocative functions of capital among those firms with
relatively high and increasing productivity. (Alile, 1997).
Be that as it may, the Nigerian Stock Market
characterized with certain problems, such as:-
i.
Lack of
interest by Nigerian companies in being listed in the exchange.
ii.
High cost of
public quotation
iii.
Reluctance to
dilute ownership and control through public quotation.
iv.
The interest
rate structure in the past which favoured debt financing over equity financing.
v.
Non
transparency and corrupt practices among the brokers and
vi.
Strigent
requirements for listing has been proved to be a veritable tool in gingering or
promoting economic growth in Nigeria .
However, this study will profer solutions to the
above and other problems and place Nigeria among the fastest emerging
markets in the world.
1.1 BACKGROUND
OF THE STUDY
The unpredictability of the markets as a result of
equity price valuations is the effects of the dynamics of stock market
investing.
However, according to Abayomi (2005) a down period
in the stock market cycle is one of it’s dynamics because of the inherent
opportunities it brings for discerning investors. Besides, this unpredictable
nature of equity movement is also one of the reasons the market had continue to
exist, strong and generating compounded returns to investors from ages past,
present and will continue into the future.
The Nigerian capital market which started largely as
a means of domesticating and expanding savings within Nigerian territory have
not had it quite easy eversince, hence, it has been bedevilled with problems
such as:
-
Frequent
fluctuations in the value of currencies.
-
Economic
instability occasioned by the low level of the economy.
-
Low savings
within the economy.
-
Lack of
interest to invest
-
Instability
within the political system.
-
Poor
communication system.
-
Inadequate
banking and savings facilities etc.
However, with the present regime and their various
reforms ranging from privatization, bank consolidations and perhaps, the
insurance industry; the necessity to promote the Nigerian capital market to
respond to the socio-economic development need of the Nation by facilitating
the transfer of enterprises from the public sector to the private sector cannot
be achieved without addressing the above problems.
1.2 THE
OBJECTIVE/PURPOSE OF THE STUDY
The objective of this research is to find out among
other things the economic contributions or importance of the Nigerian capital
market in shaping Nigeria
towards attainment of her economic, eldorado.
1.
To demonstrate
that individual and corporate participation in the Nigerian Capital Market will
help in no small measure in the channelisation of long-term funds for
investment purpose within the economy.
2.
To demonstrate
the fact that the Nigerian Capital
Market is an economic institution with the sole aim of promoting efficiency and
discipline in capital formation and allocation.
3.
To demonstrate
that the Nigerian Capital Market is listed in some other markets within Africa and is planning to reach out to the rest of the
world, thus attracting more funds into the system for productive purposes and
economic development.
4.
To demonstrate
the fact that as more companies are listed for quotation on the exchange it,
will engender wider private sector participation and a boom to the economy.
5.
To demonstrate
that the Nigerian Capital market stimulates industrial growth and development
in Nigeria.
1.3
SIGNIFICANCE OF THE STUDY
The importance of the Nigerian Capital Market to the
economic development of the nation involves reviewing the past to enable proper
adjustment to be made for now and future. This study therefore will be
important to firms, individuals employees who may want to invest their idle
funds, players, governments and academia.
The study will afford the government the opportunity
of adequately appraising and harnessing the gains of the Nigerian capital
market for better goals, by providing her with funds at any time of need, as
well as attaining economic growth
through private sector led.
The study will benefit the business community as
more funds will be made available for investment purposes, which will bring out
overall economic growth at both the micro and macro levels. The study will
afford the players the opportunity, not only to participate, but also to have
their say in how some enterprises are managed and run.
The study will afford the players the opportunity to
ensuring that such institutions as Nigerian Capital Market are more
professionally managed and made more relevant to the needs and aspirations of
the investors.
Finally, the academic will add this study to the
existing ones for reference purposes.
1.4 ORGANISATION
OF THE STUDY
In other that the purpose of this study is attained,
the research has been organized under five chapters.
Chapter one is the introduction part of the study
which provides a summarized overview of the subject matter. It contains a brief
background of the study, the statement of the problem, objectives or purpose of
the study, Research hypothesis, significance of the study, the limitations of
the study, the definition of terms and the organization of the study.
Chapter two is on the review or related literature.
The chapter reviewed the concept of the Nigerian Capital Market, economic
prospects or potentials of the market in Nigeria.
Chapter three examines the research methods and
procedures. It has two parts. Selection of data and process of data collection
and sources of data collection, example, Questionnaire personal interview,
observation, sample size calculation and tools for analysis.
Chapter four is devoted to the main findings of the
study through research data analysis, presentation and interpretation.
Chapter five marks the end of the study, it
contained the summary, conclusion and recommendations of the research.
1.5 STATEMENT
OF PROBLEM
The Nigerian Capital Market is accentuated by some
critical factors among which are corrupt practices and non transparency among
the brokers, non share conscious as a result of low income; refusal to dilute
ownership and control of businesses, instability of our local currency in the
exchange market, just to mention a few.
There is no need over stretching the fact that most
markets, not only in Nigeria but virtually all countries no matter their
strictness, development, sophistication or social planks breeds high level of
insider dealing abuses that could probably affect the confidence of the market
and as such, Nigerian Capital Market is not exempted.
Financial manipulation are not healthy for any
economy desirous of achieving economic growth and development, there is need to
engage in critical self examination with a view to addressing and removing all
impediments to economic development, hence, securities all over the world are
based on integrity and credibility – Mobolorin (2005). Therefore, the need for
strict regulatory framework and adherence to laid down rules and regulations
which are critical for the sustainance of a vibrant and developed capital
market cannot be over – emphasized.
However, with the present reforms going on in the
Nigerian Capital and money Markets direct and indirect impacts are going to be
witnessed in the areas of:
-
Sustainable
increase in the inflow of foreign investments.
-
Volume of
transactions will increase, market become more sophisticated as a result of the
Electronic Tranding system now in place.
-
There will be
injection of funds into the system, such, magnitude never witnessed in the
economy and the only challenge will be how to channel the available funds into
the market efficiently.
-
Mortgage
Markets benefiting as new instruments come into the Market including mortgage -
backed securities.
In the course of this, we will seek to unravel the
problems militating against the efficiency, effectiveness and growth of the
Nigerian Capital market as an important/indispensable sector in the financial
system of the country.
1.6 LIMITATIONS
OF THE STUDY
The study is limited to the Nigerian Capital Market
(NSE) as the provider of loanable funds (debentures) and other stocks (shares
and government stocks) for the sustainability of our industrial growth and
development.
The study encountered lots of problems in collecting
data and relevant records hence, the refusal of the Nigerian Stock Exchange to
allow photocopies of their little works made for comprehensibility and
accessibility.
The library attendant of the institution under study
felt reluctant to release materials, figures and facts relating to the study as
they claim that it is against their overall interest, instead, how much that
was traded on each day was left for public consumption.
Another major limitation is the short period within
which to complete this project are reforms of the sectors delt on (money and
capital market).
Also, the inadequate fund necessary to cover the
breath of the study. The cost of materials for the research much was exorbitant
includes; transport, magazines, Newspapers, publication in the internet,
audio-video etc. This limitations not withstanding, sufficient data was
sufficiently collected.
1.7 RESEARCH
QUESTIONS
The research questions and the methodology used herein,
are with the objective of establishing whether there is or not a problem in the
operations of Nigerian Capital Market.
Some of the questions and objectives the exercise
will seek to answer are:-
1.
Have the
Nigerian Capital Market ensured an efficient, transparent and reliable
management of leanable funds and stocks as an ingredient for promoting rapid
economic and political development and growth in Nigeria.
2.
Have the
Nigerian Capital Market facilitated the transfer of enterprises from the public
sector to the private sector.
3.
Have the
Nigerian Capital Market been providing additional channels for engaging and
mobilizing savings for productive investments within the economy.
4.
Have the
Nigerian Capital Market encouraged privatization, and re-capitalization of the
financial sector by increasing the marketability of new issues.
1.8 RESEARCH HYPOTHESIS
Considering the statement of problems and the
objectives of the study, the following hypothesis are formulated to guide the
study.
HYPOTHESIS I
Ho: Frequent fluctuations in the value of
currencies hinder the operations of the Nigerian Capital Market towards
achieving it’s goal of piloting the Nigerian Economic growth.
HYPOTHESIS II
Ho: The
unpredictable nature of the equity market pose a problem for lack of interest
to invest.
HYPOTHESIS III
Ho: Absence of
enabling environments (rules and regulations) and discipline among the players
encourage an overall growth of the Nigerian Capital Market.
1.9 DEFINITION
OF TERMS
EFFICIENCY - It
is concerned with doing the right job in
the right manner at the right time.
It also means the
capacity of producing a maximum result with a constant result measured by
comparing one entity with another.
ENABLING
ENVIRONMENT - This involves having
discipline, honesty, transparency and fairness in operations between the
players and the investors.
SHARES - This
is an individual portion of the companies capital owned by shareholders.
STOCKS - This
is the capital of the company that has been issued and can be bought in parts
at the capital markets.
BONDS - They
are promises to pay stated sum of money with interest. They are issued in
multiples of N200, N500, N1000 etc.
GILT-EDGE SECURITIES - They
are government securities issued to the public when government needs money for
developmental purposes or as a fiscal measures. They are less risky with
brighter prospects.
DEBENTURES - They
are long-term loans from members of the public to a public company. The holders
of this securities expect returns by way of interest the rate of which
pre-determined contractual and obligatory irrespective of whether the company
makes profits or not.
QUOTATION - This
is the permission for the shares of company to be bought and sold on the stock
exchange.
STOCK
BROKER - This is a person or firm who buys and sell
securities on behalf of investors.
ISSUING
HOUSES - They are principal agents the Stock Exchange who
helps to prepare prospectus and sells shares offered to the public by companies
and governments. They guarantee to buy up any of the shares which are not sold
to the public.
PROSPECTUS - This
is the document the public relies on for making investment decision.
ISA - Investment and security Act of 1999,
meant to protect the interest of investors as well as the integrity of the
market.
IST - Investment
and security Tribunal set out by the commission to protect the interest and
integrity of investors and the operators.
CSCS - Central
securities clearing system an electronic means which hastens transactions within
the market.
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