ABSTRACT
This research work centered on “The Nigeria Capital Market as a source of long term finance for economic development in Nigeria”. The problem in this study is lack of securities in the market and lack of infrastructural facilities. The research intends to look into the following objectives. To provide enough securities used to promote professional and institutionalization as well as the market and to provide adequate infrastructural facilities. The researcher used percentage method as the instrument for data analysis. The major findings of this study are as follow: it was agreed that through loans and advance adequate infrastructural facilities will be provided in the market, the researcher also discovered that government policies in the market, the researcher also discovered that government policies contributed to the capital market. In conclusion it was strongly believed that the impact of Nigeria stock exchange market is widely acknowledged. This is because the stock exchange market is a place where securities at all kinds are openly traded and where one can purchase or sell any of such securities relatively easily. The researcher made the following recommendation: The government should formulate new policies to adequate infrastructural facilities, more branches of the stock exchange should be established to enhance effectiveness and efficiency.
CHAPTER ONE
- INTRODUCTION
Capital market has been broadly defined as an institution where medium and long term finance can be raised (Aleingbdungbe, 2010). It can also be viewed as a network o specialized financial institutions, series o mechanism, process and infrastructure that facilitates the contact between suppliers and users of medium to long term capital for investment in the economy.
It has been argued that most Nigeria business lack long term capital. The business sector in Nigeria has been relaying on short term financing such as overdraft to finance even long term capital. Based on the maturity marching concept is such financing become risky. Al firms need to raise an appropriate mix of short and long term capital market. (Demirgue- leunt and lerine 2012). Most recent literature on Nigeria capital market performance in recent times is unable to details out the crucial source of capital market on economic growth empirically. This creates a research gap to be covered in the research study.
1.1 BACKGROUND OF THE STUDY
The Nigeria capital market like other developing countries has been making efforts to act as a source of long-term finance to the economic development in order to enhance the supply of these factors, Nigeria has special institution among which are the security and exchange commission (SEC) which is at the apex and serve as the regulatory authority of the market institutions, the Nigeria stock exchange (NSE), the issuing house and the stock broking firms.
Nigeria capital market is designed to mobilize long-term finance to both government and corporate bodies for economic development purpose. The Nigeria stock exchange (NSE) is the centre point, of the capital market. Securities and exchange commission (SEC) serves as the apex regulatory bodies. Ibeda (2013) defines capital market as an institutional arrange for mobilization of long-term financial instrument/ assets of more than one year maturity such as shares, debentures, stock and mortgages. This instrument are not purchased for keeps they are evidence of part ownership of shares.
The Nigeria capital market performs the traditional role of mobilizing medium to long term finance for development purpose. This relate to the issuance and marketing of shares, bonds and debentures using the services of brokers, dealers underwriters.
The capital market is categorized into two namely:
- Primary market
- Secondary market
The primary market is the market for new issues of securities. The mode to offer or subscription, right issues and offer for sale and public placement. In 2003, the activities in the new issues market were mixed. The volumes of issue increased while the number and value declined. In term of mode and issues, equity offer for subscription was dominant accounting for 93.5 percent of total shares. Right issues accounted 3.7 percent while preference stock accounted for the balance of 2.8 percent.
The secondary market is a market for trading and purchasing existing securities. This consists of stock exchange and over the counter market where securities are bought and sold after their issuance constantly by the opening of trading Hoors in other parts of the country by Nigerian stock exchange (NSE)
The participants in the capital market can be broadly classified into four:
Provider of funds (investors, individual, unit trust and other co-operate bodies)
User of funds (companies and government)
intermediaries (facilitators stock broking firms issue house, registrars)
Regulation securities and exchange commission ( the Nigeria stock exchange).
As could be seen, while the providers of funds include companies and government. In other words, individuals may not be able to raise money from the capital market as they do in money market. In this network of relationship, the stock exchange plays a central and indispensable role for which it has been variously described as the “Hall mark” or “Heart” of the capital market. This is so because even though in its stick definitions, the stock exchange is market trading on outstanding issues.
The development of the capital market has entitled a number of benefits for the Nigerian economy. There benefits are in line with the general role stock market in the development process. A further assessment of the Nigerian capital (market can be based on the following indicates:
- organization
Nigeria stock exchange has trading floor in Lagos, Kaduna, Port Harcourt, Kano, Onitsha, Ibadan and Abuja.
- Operation characteristic
Trading used to be manual cal-over system until 2010. Brokers allowed making cross-deal even on large order.
- Regulatory framework
Strong statutory with securities Exchange commission (SEC) as the apex regulatory institution.
1.2 STATEMENT OF THE PROBLEMS
The Nigeria capital market has existed for about fifty-six (56) years and it has increased in size and taken remarkable studies in the expansion of its activities. Despite this achievement, the system has many problems which includes:
- Lack of infrastructure: one of the objectives of the capital market is to provide local opportunities for borrowing and lending for long-term purpose. This cannot be done in a capital market that is face with problem of inadequate infrastructural facilities.
- Poor policy making in capital market: capital market that has poor policy making cannot enhance the activities of the market effectiveness and efficiency.
- Lack of information: A market that the investors lack information cannot be able to exploit the full potentials in the capital market.
- Lack of well trained and professional operators in the capital market.
1.3 OBJECTIVES OF THE STUDY
The major objectives of the study is to find out if the Nigeria capital market has contributed significantly to the growth and development of the Nigeria economy.
- To provide adequate infrastructural facilities
- To adopt government policies relating to governance and control of the capital market; to serve as a guide to all their activities to enhance effectiveness and efficiency.
- To provide adequate information in the rural areas as to be able to exploit the full potentials in the capital market.
- To provide well trained and professional operators in the capital market.
1.4 RESEARCH QUESTIONS
- How can capital market be provided with adequate infrastructural facilities?
- Do Nigeria capital market contributes in market effectiveness and efficiency?
- To what extent does government policies contributes to exploit the full potential in the capital market?
- How can well trained and professional operators contribute to operation of capital market?
1.5 SIGNIFICANCE OF THE STUDY
The study will give various insight into the various implications the introduction of the capital market will have in the economy of Nigeria. The various implications are:
The private sector will benefit by knowing the adequate infrastructural facilities.
It will enable the Nigeria capital market to provide effectiveness and efficiency.
It enables the researcher to carryout a useful research to exploit the full potential in the capital market.
It will help students in further academic trained and professional operators in operation of capital market.
1.6 SCOPE OF THE STUDY
For the purpose of this study is to enhance efficiency in the chosen topic of the research, the capital market as a source of long term finance for economic development in Nigeria. The researcher also intend to find out the ratio of new issues national gross capital formation, Nigeria gross national saving and Nigeria G.D.P in the Nigeria capital market. The nature of capital marker as a source of long term finance for economic development in Nigeria from 2010-2016.
1.7 DEFINITION OF TERMS
FINANCIAL MARKET: Market where financial intangible asset are traded.
FINANCIAL ASSETS: Intangible asset that represent legal claims to some further benefit.
CAPITAL MARKET: A network of specialized financial institution that are various way of bringing together suppliers and users of funds in a long-term purpose.
MONEY MARKET: This is a market for short term debt instrument that is debt with maturity less than one year.
STOCH EXCHANGE: An arrangement whereby large and small investors alike buy and sell securities through stock brokers.
STOCK BROKER: This is a person or group acting as an agent and intermediaries for buyers and sellers of stock in secondary market.
GROSS DOMESTIOC PRODUCT (GDP): This value of the domestic product of goods and services with the geographic boundaries a country over a period of one year.
ECONOMIC GROWTH: This can be defined as an increase in gross national product (GNP)
ECONOMIC DEVELOPMENT: This is an increase in the general welfare and standard of living of the vast majority of the people in that country.
SECURITIES: Written document by which claims of holder in specified property are secured.
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