THE ROLE OF CAPITAL MARKET ON DEVELOPMENT OF NIGERIA ECONOMY
ABSTRACT
This research work is aimed at showing The Role of Capital Market on Development of Nigeria Economy. It also examined the various economic theories that have postulated the key role of capital accumulation in the process the economic development of any nation. The data used were secondary data sourced from CBN and FBS statistical bulletin and the method of analysis used is the econometric technique with special focus on multiple regression analysis.
Although, capital can be mobilized from different sources, both theoretical and empirical analysis have shown that long term sources of finances are more veritable for productive capital investments. Consequently, the capital market plays a key role in this mediation process.
Emphases have been placed on indicators of stock market size, liquidity and growth over a period of thirty years; together with their combined effects on the rate of economic growth and development within Nigeria context. Empirical data were collected and analysed. The result of the analysis showed a positive relationship between the independent variables measured and their impact on economic development in Nigeria as measured by the gross domestic product (GDP). However, linking the paucity m capital market instruments as well as expansion of capital market finances to increase in real productive investment and development, it was discovered that very little is achieved in this respect.
CHAPTER ONE
1.1. Introduction
It is a known fact that the investment that promotes economic growth and development requires long term funding, far longer than the duration for which most savers are willing to commit their funds.
Capital market is a collection of financial institutions set up for the granting of medium and long term loans. It is a market for government securities, for corporate bonds, for the mobilization and utilization of long-term funds for development − the long term end of the financial system. In this market, leaders (investors) provide long term funds in exchange for long term financial assets offered by borrowers.
This market embraces both the new issues (primary) market and secondary market. Such securities might be raised in an organized market such as the Stock Exchange. In this sense, it involves consortium under writing, syndicated loans and project financing. Thus, it is a mechanism whereby economic unit desirous to invest their surplus funds, interact directly or through financial intermediaries with those who wish to procure funds for their businesses.
In the Nigerian context, participant includes Nigerian Stock exchange, Discount Houses, Development banks, Investment banks, Building societies, Stock Broking firms, Insurance and Pension Organizations, Quoted companies, the government, individuals and the Nigerian Stock Exchange Commission (NSEC).
The capital market is therefore very important to any economy because, it encourages savings and real investment in any healthy economic environment. Through the market, aggregate savings are channeled into real investment that increases the capital stock and therefore economic growth of the country.
More so, the capital market synchronize the divergent preferences for portfolio managers and financial institutions and those of savers by mobilizing long − term funds for portfolio managers and financial institutions while providing avenues for savers to invest when the need arises through the secondary market, without affecting the operation of the firm, their savings had earlier financed. In other words, through the secondary market, the capital market converts long-term or perpetual investment enlarged and economic growth accelerated.
By far the greatest achievement of the Central Bank of Nigeria since it was established on July 1st, 1959 has been the gradual development of the Nigerian financial system. The − system consists primarily of the money market for short term lending and borrowing. The Nigerian Stock Exchange (formally called the Lagos Stock exchange) is the pivot or the fulcrum around which the entire capital market rotates. It is the market for the sale and purchase of the securities, stocks and shares: a market In which those individuals, institutions and governments who have funds surplus to their immediate requirements can employ them profitably. Its major significance is that it is the machinery for the mobilization of the countries resources for economic growth and development. Since its establishment in 1961, a major local investment outlet has been provided for Nigerian investors.
As a marketplace where securities (stocks, bonds, shares) are bought and sold openly with relative ease, the stock exchange is very important to the investors. The existence of a stock exchange in a capital market helps to broaden the share ownership base of firms and evenly distribute the nation’s wealth by making it possible for people in different locations to own shares in a firm in another location by purchasing the shares, bond/ stock through the simple mechanism of tire stock market.
For the government therefore, the stock exchange provides the mechanism for exchanging the mobilization of capital for creating goods and services for the satisfaction and wellbeing of the citizens. The stock exchange is not only crucial but also central to the entire mobilization process. This is because it offers an opportunity for continuous trading in securities.
1.2 Statement Of Research Problem
The capital or stock markets are feature of the economics of Western Democracies. They do not exist in communist or socialist countries for they have no business doing there. In the western capitalist countries, they constitute the most important institution for massive capital formation geared towards economic development. The complexity of capitalist ideology resulted in the control and measures to put the economy in equilibrium state. Factors such as capital market capitalization rate, government stock rate, rate of interest charged on financial instruments amongst others exert some impact on the developmental and growth of the economy.
Bakare (2000:58) defines capitalization rate as the discount rate used to determine the present value of future earnings. It is one of the major determinants of the market size of any stock exchange. The size of the market capitalization and its growth rate pose a major influence on the growth and development of the economy. The determination of this rate is based on the forces of demand and supply of securities.
On the other hand, interest rates along with monetary aggregates form targets of monetary policy in Nigeria. Within the period chosen for this study, interest rates in Nigeria were directly managed by the monetary authorities- the Central Bank of Nigeria. This control of rate of interest was based on the 156 International Research Journal of Finance andEconomics − Issue 4 (2006) expert advice from financial gurus who perceived that the economy, as at that period, lack a well developed financial market. Under this regime control, the federal government of Nigeria did set the deposit and lending rates of the financial intermediaries at their prevailing levels. In addition, the government did set the rates for lending to specified sector of the economy with a view to encouraging (or discouraging) lending to these sectors.
If the rate of interest paid by banks to depositors is increased, investors will patronize the banks the more and fewer investors will invest on the capital market. This will lead to a decrease in capital investment in the economy. Hence, economic growth and development will be lowered, because the allocation of capital resources plays a crucial role in the determination of the rate of the nation’s output. If capital resources are not provided to those in the industries, or if capital is not made available to sectors which are capable of increasing production and productivity, the rate of the country expansion (growth) will be retarded.
Thus, the disparity in the determination of interest rate, capitalization rate by different forces must have influenced the development and growth of the economy. These influences constitute the major problem that this study intends to investigate. The variation in The interest rate might cause investors also to either go to the bank or buy government development stock (bond), thereby helping in the development of the economy. The relationship between interest rate and government stock rate will also be generated in the course of this work. The capital market is often accessed to strengthen a company’s capital base, diversify it shareholder’s base, improve the debt/equity ratio and in some cases raise money to retire existing short-term liabilities.
CHAPTER TWO
2.0 Literature Review
2.1 Introduction
The review of relevant literature is the main topic of this chapter. A literature review covers theoretical and methodological contributions to a certain issue in addition to the state of knowledge at the time of writing. It provides information about the state of the art in relation to the subject you are writing about. It examines the body of work on the chosen subject. The literature evaluation in this study comprises the …
Procedure for Downloading the PDF (Docx) Material
The Role of Capital Market on Development of Nigeria Economy can be downloaded by requesting the full set of materials at the project or seminar cost. The document will be sent via Microsoft Word (MS-Word) format via WhatsApp (e-mail) following payment confirmation.
| Seminar Material Cost ₦3,000 | Project Material Cost ₦5,000 |
Request Complete Material
 | Click here to request the Complete Material via WhatsApp including;
|
Disclaimer for Complete Material Utilization
The displayed research work titled "The Role of Capital Market on Development of Nigeria Economy" is stated as a research guideline towards accomplishing your assigned project / seminar research work. All the research materials on this website are ONLY for research purposes and should be used as a guideline in developing your research work. For no reason should you copy word for word as projectlist.com.ng will not be liable for any who copied the material. By ordering the complete research guideline, it signifies that you've accepted our terms of service.
Frequently Asked Questions (FAQ)
Is the topic “The Impact of Marketing Distribution on Sales Profitability Ginger” recommended for Marketing (MKT) Project?
Yes it is highly recommended — Ginger marketing distribution channels are group of people or organizations that direct the flow of ginger commodities from producers to consumers vertically. The study was carried out to assess the Impact of Marketing Distribution on Sales Profitability Ginger using Yakowa Market Kafanchan Kaduna State as a case study. In achieving this aim, the following specific objectives were laid out to characterize ginger traders in the study area different markets, estimate the profit function for ginger retail traders and identify the constraints faced by ginger traders in the different markets in Yakowa Market Kafanchan Kaduna State. The research design used in this report is descriptive design, utilizing questionnaire method to obtain information from the respondents for this project. A total of …
Can the material for “Design and Implementation of a Computerized Recruitment Management System” be used as a guide for Computer Science (CS) Project?
Yes it can be used — A recruitment management system is a comprehensive tool to manage the entire recruitment processes of an organization. The aim of the study is to Design and Implement an Online Recruitment Management System. In achieving this aim, the following specific objectives were laid out as follows to design and develop an application software that will properly document an individual’s job profile in the organization or firm and create a quick search and advance search that the user will use during the recruitment process. The motivation that led to the implementation of the proposed system is that applicants are increasing day by day, and are putting in their application for available job being advertised for enlistment in any company of their choice …
Can this topic “Farm Power Sources and Utilization” be used for Agricultural Engineering (AE) Project?
Yes it can be utilized for research — Evaluation of power sources helps to know the power available for agricultural. Thesis necessary to know, because power input to agriculture affects the volume of agricultural production. In view of this, the farm power sources available in Igbo-Etiti Local Government Area of Enugu State were evaluated and it was found that human power internal combustion and energy from the sun were available. …
Can the material for “Problems of Personnel Management in Government Owned Establishment” be used as a guide for Personnel Management Project?
Yes it can be used — Personnel Management in simple terms means the act of getting people together to accomplish desired goals. The study was conducted to examine the problems prevalent in the personnel department of government owned establishment using Suleja Local Government as a case study. The study went ahead to investigate the problems of the personnel department and to identify some factors which militate against the effect of the inefficiency on the staff of the personnel department and the establishments at large. The research design used in this report is descriptive design, utilizing questionnaire method to obtain information from the respondents for this project. A total of 250 (two hundred and fifty) respondents were selected for this study to represent the entire population of …
Is the topic “Makurdi Airport Terminal Building, Benue State” recommended for Architecture Project?
Yes it is highly recommended — The airport terminal is a building at an airport where passengers transfer between ground transportation and the facilities that allow them to board and disembark from the aircraft. Within the terminal, passengers purchase tickets, transfer their luggage, and go through security. The buildings that provide access to the airplanes (via gates) are typically called concourse. However, the terms terminals and concourses are used interchangeably, depending on the configuration of the airport. A functional airport passenger terminal is meant to ease the stress encountered by air passengers during the process of air travel. Therefore the architectural problem of the project is how best to provide an aesthetically pleasant, efficient, economical, bigger and more modern domestic airport passenger terminal, with good flexibility …
Can the material for “Feminist Attitude on the Dilemma of the Girl Child in African Culture” be used as a guide for English Language Project?
Yes it can be used — This research examines the dilemma of the girl child in African culture and the fundamental problems confronting her existential being. It explores the unfair treatment the girl-child receives in a male chauvinistic and particular society like Africa and the negative effects of such to her femininity. As a way of redeeming the dignity of the girl child and positioning her for a better life, emphasis is placed on the feminist approach and how such could be used to combat the various exploitative and unjust treatment most African societies subject the girl child to in the name of custom and tradition. Since, the discourse of feminism flows well with the objective of this research, efforts will therefore be made to extract …
Can the material for “Challenges and Prospects of Initiating Small Scale Companies in Ekiti State” be used as a guide for Business Administration and Management (BAM) Project?
Yes it can be used — The study was carried out to investigate the Challenges and Prospects of Initiating Small Scale Companies in Ekiti State. In achieving this aim, the following specific objectives were laid out to appraise the issue of risk of under capitalization and related this to the reluctance of proprietors to bring in partners or adequate financing and analyze the inability of the owned-manager to acknowledge their own weakness and tap the resources of talents of employees. Investigation revealed that the issues of inadequate financing usually derive from inadequate proprietorship equity participation. A strong capital base and financial outlook are required for a successful business. The problems of facing small-medium scale enterprises in Nigeria are not insurmountable since Nigeria is well placed to …
Can the material for “The Role of Social Studies in Correcting Societal Vices and Improving Social Values Among the Youth” be used as a guide for Social Studies Project?
Yes it can be used — This study investigates the role of social studies in correcting societal vices and improving social values among the youth. A case study of Abeokuta South Local Government Area. The population for the study involved some selected secondary schools and five school were randomly selected in the area, one hundred (100) questionnaires were developed to collect information on the role of social studies in correcting social vices and social values among the youth in Abeokuta South. The result of the analysis revealed that social studies as a subject is capable of correcting the societal vices because it is a social science subject. More so, the result show that social vices are delinquency, drug addiction and prostitution in our societies which can be …
Can the material for “Impact of Human Resources Management (HRM) Practices on Organizational Performance” be used as a guide for Human Resource Management (HRM) Project?
Yes it can be used — Human Resource Management is the strategic, integrated and coherent approach to the employment, development and well-being of the people working in organizations. The study examines the Impact of Human Resources Management (HRM) Practices on Organizational Performance. In achieving this aim, the following specific objectives were laid out to determine how Recruitment and selection practices affect employee effectiveness in Eco bank (Nigeria) Plc, assess the effect of performance appraisal on employee performance in Eco bank (Nigeria) plc, evaluate the influence of compensation plan on Employee Motivation in Eco bank Nigeria Plc, and Investigate how training and development programs affect organizational commitment in Eco bank (Nigeria) plc. The research design used in this report is descriptive design, utilizing questionnaire method to obtain …
Can this topic “Computerized Accounting System as an Aid to Efficient Management of an Organization” be used for Accounting and Finance Project?
Yes it can be utilized for research — Computerized Accounting System is an electronic-based system that processes economic information and supports decision tasks in the context of financial management and control of firm activities. The aim of the study is to Design and Implement a Computerized Accounting System as an Aid to Efficient Management of an Organization. In achieving this aim, the following specific objectives were laid out as follows to develop an application software that will identify the relevance of Computerized Accounting System as an Aid to Efficient Management of an Organization for business growth and assess the various application of accounting information system by banks. The motivation that led to the implementation of the proposed system is the poor accounting information jeopardizes administrative effectiveness, which makes …