IMPACT OF STOCK EXCHANGE ON CAPITAL ACCUMULATION IN NIGERIA: AN EMPIRICAL ANALYSIS 1980-2010.
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IMPACT OF STOCK EXCHANGE ON CAPITAL ACCUMULATION IN NIGERIA: AN EMPIRICAL ANALYSIS 1980-2010.
Chapter One: Introduction 1.1 Background of the Study
The stock exchange market, as an arm of the capital market, is an important institution for long-term financial intermediation.
Because of the vast opportunities that result from its activities, the stock exchange plays a vital part in the capital formation process and enhances developmental growth.
The Nigerian stock exchange is projected to mobilise long-term savings in order to finance long-term investment by providing entrepreneurs with equity-based capital. The stock exchange is more than just a financial institution; it is the capital market’s central hub, around which all capital market activity revolves.
Capital accumulation involves both net addition and transfer of wealth, raising the question of who gains the most. If more wealth is created than there was previously, a community becomes wealthier, and the overall stock of wealth grows.
However, if some amass capital at the expense of others, wealth is simply transferred. It is possible that a few organisations collect money and become wealthier while the overall stock of wealth in society diminishes.
The securities market, particularly the stock market, determines the value of a company’s capital stock. The value is calculated by multiplying the installed capital price by the capital quantity.
The work is about estimating the amount of capital and thus the amount of capital accumulation based on the observed values of securities. In the simplest scenario, without adjustment costs, the price of capital is observed in capital goods markets and also represents the price of installed capital.
The stock market value is determined by the amount of capital available.
There is a claim that the stock exchange market in developing nations in general has failed to meet expectations in terms of the extent and degree of capital mobilisation for economic growth and development, despite government policies implemented at various times.
The Nigeria Stock Exchange’s performance over the last roughly 30 years has been rather dismal when compared to other stock exchanges of similar age in several developing countries.
The stock exchange market has been assigned a critical function in fostering capital accumulation. There is now a push for greater corporate governance to defend shareholders’ interests, which will contribute to stock market growth and capital accumulation.
The government’s stated goal of ensuring a proper legal framework in the stock market is to promote growth through capital accumulation.
A comparison of the Nigerian stock market to the stock markets of Korea, Malaysia, and India, based on indicators such as market capitalization as a proportion of GDP and value of stock traded, reveals the Nigerian capital market’s abysmal situation.
Between 1983 and 1999, all nations except Nigeria had significant increases in market capitalization as a percentage of GDP. (See Ogwu Mike and Omole, 2004). Only Nigeria had this ratio rise by less than one percentage point.
Other measures, such as the number of listed businesses and the value of stock exchanged, point to the Nigerian stock exchange market’s relatively weak performance.
The relationship between the stock market and capital accumulation has been a source of debate, as it can relate to either an increase in current wealth or a redistribution of it.
1.2 Statement of the Problem
The main issue in evaluating the Nigerian stock exchange market is the capital and money markets, which comprise the financial institution.
The intricacy of this understanding of operational systems, the link between capital and other specialised institutions, and the eventual impact of capital market activities on national economies have all been considered.
This study revealed a problem with the lack of literature on Nigeria’s capital market and securities.
(ii) Public ignorance of the presence and benefits of the Nigerian stock exchange, with a focus on the consequences of this ignorance in terms of lost investment opportunities.
(iii) The major problem with the stock market is that stock prices fluctuate far more than the real worth of the companies that represent the shares.
(iv) The internet problem in the stock market is based on the fact that information might be inaccurate and deceptive, causing stock values to rise or decrease. Furthermore, unlawful investors fraudulently inflate the price of a stock for their personal gain.
1.3 GOALS OF THE STUDY
The study aims to improve the stock exchange market in Nigeria by creating an organised, fair, and efficient market for trading securities, as well as a transparent and safe environment for investors.
(ii) Developing techniques and methods for trading securities on the stock market.
(iii) Meeting the most recent international standards.
(iv) Disseminating trading information to the greatest number of dealers and interested parties.
(v) Increase public knowledge throughout all elements of society, with a focus on securities dealers.
(vi) Ensure transparency and integrity in stock market transactions.
(vii) Determine the relationship between stock exchange development and capital accumulation.
1.4 The Hypothesis of the Study
Market capitalization has a positive link with capital accumulation, as does portfolio investment.
There is a positive association between the exchange rate and capital accumulation, as well as between the Real Gross Domestic Product (RGDP) and capital accumulation.
1.5 Significance of the Study
Individuals, entrepreneurs, and the general public will all benefit greatly from this study. Because the findings of this study would be extremely informative in terms of their impact on stock exchange and capital accumulation in Nigeria.
The study’s findings will be extremely valuable to the government since they influence the development and expansion of the economy, which in turn influences the government’s monetary policies.
1.6 SCOPE OF THE STUDY
Securities offered in the Nigerian stock exchange market are broadly grouped into two types: government development stock and industrial securities, which include shares and preferred stock.
However, because we are concerned with the stock exchange and capital accumulation, we will solely consider stock market size and capital stock in this study.
The period and topic were chosen to keep the study as current and relevant as feasible. The study will also examine the performance of the stock exchange from 1980 to 2008 and the impact on capital accumulation.
1.7 Methodology of the Study
The research activity will employ theoretical exposition as well as secondary data analysis to accomplish this.
The data for this study would be mostly gathered from secondary sources, including Central Bank of Nigeria (CBN) publications (such as the CBN statistical bulletin, CBN reports, and statement of accounts) and other published works.
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