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)
Can the material for “Effect of Demonstration and Project Methods of Teaching on Students’ Achievement and Interest in Some Graph Related Concepts in Economics” be used as a guide for Education Project?
Yes it can be used — The main purpose of the study was to determine the effect of demonstration and project method of teaching on students’ achievement and interest in some graph related concepts in Economics. The problem that necessitated the study is students’ low achievement in Economics as reported by research. The review of literature was carried out under three broad headings namely conceptual framework, theoretical framework and empirical studies. The study adopted quasi-experimental design − a non-equivalent control group design. The population of the study comprised of all SS II students in Ikeduru local Government area in Imo state. The researcher sampled two intact classes out of which one was taught using demonstration teaching method while the other class was taught using project method. Two …
Can this topic “Design and Implementation of a Weather Forecasting System for Aviation Industry” be used for Computer Science (CS) Project?
Yes it can be utilized for research — Weather forecasting is the application of current technology and science to predict the state of the atmosphere for a future time and a given location. The aim of the study is to design and implement a weather forecasting system for aviation industry. In achieving this aim, the following specific objectives were laid out to develop a workable weather forecasting system, present the concept and techniques of weather forecasting system, showcase the importance and limitation of weather forecasting system, design a system that will enable Aviation industry to make decision on flight control based on information given, study and use advance programming language as logical tool for forecasting weather conditions, and make sure of effective analysis, design implementation, and also provide …
Can the material for “Design and Construction of Laser Based Intruder Alarm System” be used as a guide for Electrical / Electronics Engineering (EE) Project?
Yes it can be used — Laser beam in light operated project works are mostly used as means of putting things ‘ON’ remotely or used as trap which when obstructed results in a switching into action another operation. The study was conducted to design and construct a laser based intruder alarm system. In achieving this aim, the following specific objectives were set out to develop a laser gun using a GA as diode to generate continuous laser beam for sensing by a detector, develop a receiving circuit based on LDR (light dependent resistor) to detect the laser beam, develop a switching circuit to switch into action a specified load, design a 555 timer based alarm system, and realize a suitable power supply system unit for the …
Can this topic “The Impact of Effective Human Capital Management Practice on Organizational Growth” be used for Business Administration and Management (BAM) Project?
Yes it can be utilized for research — The main purpose of this study is to know the impact of effective human capital management on organizational Growth. Every organization, no matter the nature and activities being undertaken by it, will not exist. This time, the other factors of production like materials, capital and machines will be meaningless if there are no human beings to harness them. The availability of manpower is not just the issue but its effective and efficient manpower on the organization enhance the need for human capital management. Therefore, this study has tried to unfold the basic functions of human capital management and its impact and effectiveness of organization growth. With references to impact effective human capital management of organizational growth, the impact of effectiveness, …
Can this topic “Bank Fraud Causes and Prevention” be used for Banking and Finance (BF) Project?
Yes it can be utilized for research — The need for an efficient and prudent banking industry for banking transactions in this country need not be over emphasized it is an accepted fact that majority of the populace of this country have this attitude of getting rich quick without really working very hard for it one their dream ways of achieving this lack luster dream is through fraud perpetration. And with the belief that banks keep so mud money with them the act how effects the banking effects and preventions of bank fraud they will also be able to have lake on how such bank frauds are perpetrated and the major perpetrations of such frauds this is to keep them at alert because one do not know whose …
Can the material for “The Challenges of Effective Christian Leadership in 21st Century Church” be used as a guide for Religious Studies Project?
Yes it can be used — The study scrutinizes the Challenges of Effective Christian Leadership in 21st Century Church. In achieving this aim, the following specific objectives were laid out to integrate and apply the 11 principle of leadership characteristics for proper functioning of the 21st century church or the local church, realize the central and critical role of effective Christian leadership and assign a proper place and function to the same in the church, provide information that will facilitate church (the Body of Christ) experience growth, strength and development in the area of leadership, and examine the various issues involved in the study how christen leadership has effected administrative structure of church growth and development. The research design used in this report is descriptive design, …
Is the topic “Literature in Northern Nigeria: Language and Popular Culture” recommended for Literature in English Project?
Yes it is highly recommended — This essay delves into the study of literature in northern Nigeria. The study discusses the scope of literature, the region of Northern Nigeria and aspects of its popular culture, and finally goes ahead to examine the socio-political issues captured in Abubakar Gimbar’s Inner Rumblings. It concludes that the literature of Northern Nigeria still needs to be explored to the fullest by the activities of Northern Nigerian writers so as to bring it to the fore of Nigeria and the world at large. …
Can the material for “The Application of Ratio Analysis to Business Organisations” be used as a guide for Business Administration and Management (BAM) Project?
Yes it can be used — Financial information provided in financial statements are useful in business decisions, however, it must be noted that financial statements are means to an end in themselves. This study examines the effectiveness of the application of Ratio analysis to business organizations and the need to understand and interprete the contents of financial statements. Various classes of ratios were examined under literature review. This gives an insight to how ratios can be used to predict and determine organization’s performance over a period of time. Usefulness of ratio analysis was discussed and its limitations. Summary of major findings, conclusion and recommendations was made based on the information gathered. The reader will find this work useful in their day-to-day business activities and its effective application to their business …
Can this topic “Staff Development Programmes and Teachers Effectiveness in Secondary Schools” be used for Education Project?
Yes it can be utilized for research — This study investigated the impact of in-service training programmes on students‟ academic performance, examined the effect of part-time and full-time training programmes on teachers‟ teaching methods, determined the modes of training adopted by the various schools in training their teachers and also examined the impact of in-service training programmes on teachers teaching methods in the classroom. This was with a view to finding out the impact of staff training and development programmes on teachers‟ effectiveness in secondary schools in the study area. Survey research design was employed for the study. The target population of the study was teachers working in the secondary schools of Ibadan South East Local Government Area of Oyo State with a sample population of 150 teachers who …
Can this topic “Science Curriculum Implementation Strategies / Models in Senior Secondary Schools” be used for Education Project?
Yes it can be utilized for research — This study focuses on science curriculum implementation strategies/models in senior secondary schools in Port Harcourt. . A proper research was carried out to find out the strategies adopted in senior secondary schools in Port Harcourt for science curriculum implementation, to ascertain the factors Responsible for Implementation of Government Curriculum in senior secondary schools in Port Harcourt, to find out the challenges facing science curriculum implementation strategies in senior secondary schools in Port Harcourt, to determine the performance of students of senior secondary schools in Port Harcourt in science subjects, and to investigate how to improve science curriculum implementation strategies in senior secondary schools in Port Harcourt. In carrying out the research, research questions are been set in order to direct …