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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.
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