GROWTH OF CAPITAL MARKET AND ITS CONSEQUENCES ON A DEVELOPING ECONOMY
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GROWTH OF CAPITAL MARKET AND ITS CONSEQUENCES ON A DEVELOPING ECONOMY
CHAPTER ONE INTRODUCTION
1.1 BACKGROUND FOR STUDY
The capital market is a subset of the financial system that drives growth in modern economies. The capital market is a subset of the financial market in which medium to long-term financial instruments are generated and/or traded to meet the long-term funding requirements of economic activities. The market’s effectiveness and efficiency will decide how much it contributes to economic growth and development.
The relative development and reliance of economic activity on the capital market have been proposed as major explanations for the relationship between macroeconomic stability and financial system soundness. When national policy making ignores this, a significant potential for economic stabilisation and rapid expansion is wasted or vitiated.
However, the market in question, where such a transaction may take place, is the Nigerian stock exchange.
The stock exchange serves as a trading ground for the sale and purchase of securities, mobilising funds for medium and long-term financing. Because the stock market is the most visible manifestation of the capital market, it naturally (as an operator) derives its role from it.
As a result, it is widely believed that if the capital market provides funds, it does so with the assistance of its authorities and regulators, which include the Ministry of Finance, the Central Bank of Nigeria (CBN), the Nigerian Stock Exchange (NSE), and the Securities and Exchange Commission (SEC). Above all, the Nigeria Stock Exchange is regarded as the most viable since it provides a market for the resale of transferable securities, thereby mobilising the required cash.
However, I believe the outcome of this reserve will be to study the basis of the rise of the capital market and its effects on Nigeria’s rising economy.
1.2 Importance and relevance of the research.
This research is significant because, as a future manager, it can serve as a guide to practitioners and individual corporate organisations involved in security markets, educate policymakers and the organised private sector on the capital market’s contributions to the capital formation process, and highlight the need for more small and medium-sized enterprises to use the stock exchange’s second-tier security market.
The research will serve as a useful guidance for prospective investors. The study will be a convenient supply of knowledge for everyone interested in learning about the financial market.
1.3 Research Problem (S)
The capital market has improved greatly in terms of market capitalization, volume of long-term debt stock sold, transaction volume, and the number of operators (for example, stock brokers). However, it remains a tiny source of long-term financing.
It is suggested that during the course of this investigation, various capital market issues were uncovered.
They are:
1. The securities and exchange commission’s limiting regulatory environment influences the number and value of securities offered.
2. The stock market has yet to contribute and offer the necessary amount of investment to increase the percentage of the manufacturing sector that accounts for GDP growth.
3. The educational disparity in the population makes it nearly hard for some people to recognise investment opportunities.
4. The ineffectiveness of the second-tier security market stems from indigenous companies’ lack of reaction and interest non being mentioned on the Nigerian Stock Exchange.
1.4 Research Objectives and Questions
The primary purpose of the suggested research is as follows:
(a) To investigate the function of capital markets in economic development.
(b) To analyse the performance/growth economic contributions of the capital market to the Nigerian economic development process.
(c) To highlight issues affecting the Nigerian capital market in national policy making.
(d) Need for a paradigm shift in the development process.
The primary research questions to be addressed are:
(i) How deep is the market?
(ii) What is the percentage of the market capitalization to the rate of GDP from 1992 to 2002?
(iii) How many companies and brokerage firms operate on the capital stock exchange?
1.5 Guide to Subsequent Chapters
The introduction concludes with a quick overview of the chapters that follow.
The second chapter gives proof of the research and constructive criticism. Prior study has identified the economic functions and contributions of the capital market, as well as their ramifications for a developing economy.
Capital market in national policy formation, fiscal measures in capital market development, microeconomic objectives, capital market expansion, and its implications for capital market structure.
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