STRUCTURE OF THE NIGERIAN CAPITAL MARKET AND ITS IMPACT ON ECONOMIC DEVELOPMENT.
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STRUCTURE OF THE NIGERIAN CAPITAL MARKET AND ITS IMPACT ON ECONOMIC DEVELOPMENT.
Chapter one
INTRODUCTION
1.1 Background for the Study
The Nigerian capital market is part of the Nigerian financial system. The Nigerian financial system has served as the lifeline for the Nigerian economy, steering its macroeconomic factors. Any economy must have a highly robust financial system in order to adequately meet its responsibilities, i.e., citizens.
The financial system is a set of laws and regulations that govern the aggregation of financial arrangements, institutions, and the rest of the world in order to boost a country’s economic growth and development.
It accomplishes this by providing a medium of exchange that encourages specialisation, mobilisation of resources from surplus units, and channelling them into the economy’s deficit units for productive capacity, overall output, and employment (Akinsulire, 2011).
The Nigerian financial system has evolved over the last few decades from rudimentary to sophisticated, with numerous institutions and operators that facilitate the system’s primary role of saving, mobilising, and allocating resources among competition units within the system.
The Nigerian financial system consists of many financial institutions, instruments, and operators. The Central Bank of Nigeria (CBN), the Federal Ministry of Finance (FMF), and the Securities and Exchange Commission (SEC) are Nigeria’s three principal regulatory institutions.
Others include commercial banks, development banks like the Federal Mortgage Bank of Nigeria (FMBN), the Nigeria Bank of Industry (BOI), the Nigeria Agriculture and Cooperative Bank (NACB), the Nigeria Industrial Development Bank (NIDB), and specialised banks.
Other institutions and funds include the National Pension Commission (PENCOM), insurance firms, the National Economic Reconstruction Fund (NERFUN), financial institutions, Bureau De Change, and the Nigeria Deposit Insurance Corporation (NDIC). In terms of quantity and variety, Nigeria’s financial system is quite solid.
The information shows that the financial system is the mechanism that a country employs to raise revenue.
The purpose of this research is to shed light on how the capital market operates by examining the significance of corporate capital to Nigeria’s economy.
1.2 Statement of Problem
The goal of this research is to examine how the capital market functions and how it affects Nigeria’s economic progress.
However, the researcher identified the following issues during the course of the study: a lack of literature covering the Nigeria capital market and corporate securities, public ignorance of the existence and benefits of the Nigerian stock exchange
with a focus on the impact of this ignorance in terms of lost investment opportunities, and an understanding of the mechanism, structure, and rating of the Nigerian capital market.
1.3 Research Questions.
This study was guided by the following research questions:
1. Does the capital market generate sufficient funds for economic development?
2. Does the capital market have a big impact on the general population?
3. How can the capital market contribute to Nigeria’s economic growth?
1.4 Objectives of the Study
The purpose or objectives of this study are:
· Determine if capital markets supply sufficient funding for economic development.
· Determine if the capital market has any meaningful impact on the masses.
· Investigate the role of capital markets in boosting Nigeria’s economy.
1.5 Statement of Hypothesis
For the purposes of this study, the following hypothesis will be evaluated and used to analyse data. First, there are two kinds of hypotheses:
Hypothesis One.
HO: The capital market does not supply adequate funding for economic development.
Hello: The capital market provides adequate funding for economic progress.
Hypothesis Two
HO: The capital market has little impact on the masses.
Hello: The capital market has an impact on the masses.
1.6 Significance of the Study
The stock market operates in a complex and dynamic environment; thus, the social economic arch will aid in understanding the stock exchange’s role in capital information accumulation, allocation, and transfer to sounds as it adapts to an ever-changing society.
Furthermore, a thorough investigation of the operation and structure of the capital market will raise public knowledge, easing the burden on enterprises and the general public as investment motivations shift.
The National Stock Exchange is an institution that assists enterprises in raising cash for economic growth, such as spending on schools, roads, and other public services, in order to mobilise long-term funding.
1.7 Scope of Study
The purpose of this study is to investigate capital market operations on Nigerian stock exchange floors. However, for the purposes of this study, due to the different constraints identified by the researcher. Only the Lagos floor of the Nigerian Stock Exchange was covered. The researcher did not attempt to analyse other stock market floors in other states, and the time period covered is 2009-2013.
For the purposes of this study, the researcher utilised a sample size of 120 to ensure an effective survey.
1.8 Limitations of the Study
The study faces some limits that may possibly affect the generalisation of findings. The constraints include the following:
Compiling the necessary information for this work was challenging. One such issue is that some employees refuse to give any information about their jobs for fear of being fired.
· Material sourcing challenge: Obtaining current resources, textbooks, journals, and seminar papers related to the research topic proved challenging. The University of Benin library is out of date for this inquiry.
1.9 Definitions for Terms
· Above per value refers to selling a share at a higher price than its regular worth.
· Allotment: The number of shares allocated to a prospective investor.
· Asked price: The firm’s desired price for selling its shares.
A bear is an investor who believes market prices will fall.
· Broker: A stock exchange member who deals with securities. He offers services to anyone (an investor) who wishes to buy and sell stocks.
Bonds are a type of securities traded on the stock exchange.
· Bull: Investor who expects market values will rise.
· Stag: An investor seeking to profit from new share offerings. He buys the shares before they are listed and sells them at a greater price shortly after they are listed.
· Profit earning ratio refers to a share dividend’s earnings over a 12-month period.
· Share: Equitable ownership of a company’s capital.
· Dividend: A share of a company’s profit distributed to its shareholders. Dividends are not fixed amounts. It does not always remain the same.
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