ROLE OF CAPITAL MARKET IN THE DEVELOPMENT OF SMALL SCALE BUSINESSES IN NIGERIA
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ROLE OF CAPITAL MARKET IN THE DEVELOPMENT OF SMALL SCALE BUSINESSES IN NIGERIA
Chapter one
INTRODUCTION
1.1 Background to the Study
To stay afloat in today’s world of globalisation, deregulation, and market liberalisation, any economy must have an efficient business financial system to direct the allocation of its resources, capital markets, and institutions, of which development is an integral part of paramount importance in a dynamic economy like Nigeria.
The capital market is a market for securities (equity or debt) that allows businesses and governments to raise long-term cash. It is also characterised as a market in which money is provided for more than a year, as short-term funds are raised on a market, such as the money market.
The capital market encompasses both the stock market (equity securities) and the bond market (debt). The Securities and Exchange Commission (SEC) regulates the capital market in its specified area to protect investors from fraud, among other responsibilities.
Nigeria is still grappling with the problems of low profits and the resulting balance of payment issues, a weak technological industry base that results in significant imports of machinery and raw materials, and a high percentage of unemployment.
The economic downturn that began in 1978 is still very much with us. The drop in Gross Domestic Product (GDP) from N26.9 billion in 1984 to N3.6 billion in 1985 signalled the start of importation of the world’s discarded products into our country, making Nigeria a dumping ground.
Small-scale business is the only method to increase exports and reduce the bleak balance of payment deficit.
The Nigerian government recognised this fact in 1971, introducing a small-scale industries financing plan and then establishing the Nigeria Bank for Commerce and Industry in 1978. The Central Bank of Nigeria also launched its small-scale business.
Despite all of these measures, it is clear that the main issue facing small businesses is money. In reality, the expansion of small businesses is dependent on enough capital, which is currently lacking.
The capital market appears to be an alternative option to raise finances. The development of an advanced and lively capital market can result in the use of financial resources.
Domestic industry can also gain access to international funds through the developed capital market. Thus, the capital market contributes positively to the overall development of an economy.
1.2 Significance of the Study
The capital market is of significant interest to the researcher, and it will help me expand my knowledge and skills. Furthermore, this sector of the economy is essential and plays a big part in the natural economy.
A robust, dynamic, and energetic capital market can significantly contribute to rapid economic growth and development.
1.3 Statement of the Problems
Nigerian small businesses struggle with insufficient and poor working capital. This element of small has significantly slowed the growth and development of small-scale businesses, resulting in a slow pace.
They mostly rely on self-finance (saving and borrowing from friends and family) and loans from willing providers (banks), who are always hesitant to lend to them because of their poor financial past or history.
Small firms in Nigeria face the difficulty of concentrating risk in the hands of its owners. As a result, by listing their company on a stock exchange, they may share the risk.
The capital market is also experiencing issues as a result of insufficient supply of securities and a drop in the stock exchange market. Most enterprises, particularly indigenous ones, are still hesitant to raise cash through the stock market.
1.4 Study Objectives
a. To inquire about the development of the Nigeria Capital Market in small-scale firms.
b. Determine the trend and growth of the capital market.
c. Investigate the elements that solely influence the Capital Market.
d. Make relevant recommendations for the growth of the Nigerian capital market.
1.5 Research Hypotheses
The following will be developed and tested for the project.
Ho: Small-scale business approaches are not used in the Nigerian capital market for firm development.
Hello: What approaches are used in the Nigerian capital market to develop small-scale businesses?
Ho: Shareholders do not rely on small-scale businesses in the Capital Market.
Hi: Shareholders rely on small-scale businesses in the Capital Market.
Note: H0 = Null Hypothesis.
Hi = Alternative Hypothesis.
1.6 RESEARCH QUESTIONS.
This study project will aim to answer the following questions:
1. How is the development of small-scale businesses related to the capital market?
2. How relevant are the small-scale business methods used in Nigeria’s capital market?
3. To what extent do shareholders rely on small-scale businesses in the Capital Market?
4. To what extent has the capital market’s role in promoting the growth and development of small businesses been met?
1.7 Method for Data Collections
This study will utilise both primary and secondary data collection methods.
PRIMARY DATA
This data will be acquired through interview investigations, questionnaires, and face-to-face discussions.
Secondary data
This information will be gathered mostly from a literature study or ready-made resources such as written papers such as textbooks, bulletins, and write-ups by specialists in this field, as well as from the internet.
1.8 Method for Data Analysis
This chapter aims to clearly explain how data gathering is employed in the research work gathered; the data gathered is not a goal in itself, but rather stands to be analysed into relevant and usable information. The goal of this chapter is to analyse an evaluation.
The chi square (x2) statistic will be employed. This will allow the following to be created and its validity verified through the presentation of facts to test the two hypotheses mentioned above, which will be explained more in Chapter 4.
1.9 Scope and Limitations of the Study
The study’s scope will be limited to the role of the capital market in the development of small-scale businesses in Nigeria, as well as how the efficient use of existing domestic capital resources might result in beneficial improvements in their performance.
As the title suggests, this study focuses on the role of capital markets in the development of small-scale businesses in Nigeria.
1.12 Definition of Terms
Capital Market
This is the market for long-term capital, or financing assets. It is a market for trading long-term financing assets such as preferred and common stock debentures and bonds.
Primary Market
This refers to the new issues market, which occurs when a company issues new securities, such as bonds or common stock, which are then sold in the primary market. Once the securities have been sold, any futures sales take place in the secondary market. The primary market is also present in the money market.
Secondary Market
This market exists as a result of the future sale of securities that were previously traded in the primary market.
The Securities Market
This refers to the market in which securities are purchased and sold. It has three dimensions: capital market, money market, and secondary market.
Right Issues
This is the process by which quoted firms raise additional cash by the issuance of special shares to current shareholders. It is typified by the ongoing privatisation process.
Allotment
Is a portion of stock issued, appointed, or assigned by an in vestment company to a buyer or subscriber of its shares, stock, or securities.
Dividend:
A part of a company’s net profit that has been publicly disclosed by its board of directors for distribution to its ordinary shareholders and authorised by them at a general meeting.
Equity:
This describes a company’s ordinary share capital.
Stock Broker:
Is a regulated professional broker who buys and sells shares and other securities on the market on behalf of investors.
Listing:
This refers to a stock or bond’s admittance to trading on the stock exchange based on its size, profitability, and number of shareholders.
Quotation:
The highest bid to buy and the lowest offer to sell a securities in a specific market and time.
Issuing House:
Is there a financial institution, such as a merchant bank, that helps new companies get their shares listed on a stock exchange? It also guarantees that the listing of such issues adheres to exchange regulations.
Shares:
A share of stock ownership in a corporation.
Share Price:
Is the price of one share of a company’s saleable stock.
Shareholder:
Is someone who buys shares in a corporation and therefore becomes one of its owners.
Ordinary Share
Representing a portion of a company’s capital and entitles its holders to a dividend that changes depending to the company’s success, a vote at all member meetings, and a claim on the company’s assets after the holders of preference shares.
Share Certificate
Is a written document signed on behalf of a firm that serves as legal proof of ownership of the given number of shares.
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