AN APPRAISAL OF THE CAPITAL MARKET ON THE ECONOMIC DEVELOPMENT OF NIGERIA

AN APPRAISAL OF THE CAPITAL MARKET ON THE ECONOMIC DEVELOPMENT OF NIGERIA

TABLE OF CONTENTS

Title Page        -           -           -           -           -           -           -           -           -           -           i

Declaration      -           -           -           -           -           -           -           -           -           ii

Approval Page            -           -           -           -           -           -           -           -           -           iii

Dedication       -           -           -           -           -           -           -           -           -           iv

Acknowledgements    -           -           -           -           -           -           -           -           v

Table of Contents       -           -           -           -           -           -           -           -           vii

List of Tables   -           -           -           -           -           -           -           -           -           x

Abstract           -           -           -           -           -           -           -           -           -           -           xi

CHAPTER ONE: INTRODUCTION

1.1       Background to the Study        -           -           -           -           -           -           1

1.2       Statement of the Problem      -           -           -           -           -           -           3

1.3       Objectives of the Study          -           -           -           -           -           -           4

1.4       Research Questions   -           -           -           -           -           -           -           5

1.5       Research Hypotheses            -           -           -           -           -           -           6

1.6       Significance of the Study       -           -           -           -           -           -           7

1.7          Scope of the Study     -           -           -           -           -           -           -           7

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1       Introduction     -           -           -           -           -           -           -           -           8

2.2       Conceptual Framework          -           -           -           -           -           -           8

2.3       Objectives and Functions of Securities and Exchange Commission (SEC) -           -           -           -           -            -           -           16

2.4       The Regulatory tools of Securities and Exchange

Commission (SEC)     -           -           -           -           -           -           -           19

2.5       The Organizational Structure of Securities and

Exchange Commission (SEC)           -           -           -           -           -           25

2.6       Analysis of the Nigerian Capital Market

Performance   -           -           -           -           -           -           -           -           27

2.7       Capital Market and Economic Development -           -           31

2.8       Review of Empirical Studies- -           -           -           -           -           34

2.9       Chapter Summary      -           -           -           -           -           -           -           40

CHAPTER   THREE: RESEARCH METHODOLOGY

3.1          Introduction     -           -           -           -           -           -           -           -           42

3.2          Research Design        -           -           -           -           -           -           -           42

3.3       Population of the Study          -           -           -           -           -           -           43

3.4       Sample Size of the study        -           -           -           -           -           -           43

3.5       Sources of Data Collection-   -           -           -           -           -           43

3.6       Techniques of Data Analysis -            -           -           -           -           -           44

3.7       Model Specification    -           -           -           -           -           -           -           45

CHAPTER FOUR: DATA PRESENTATION ANALYSIS AND FINDING

4.1          Introduction     -           -           -           -           -           -           -           -           47

4.2       Data Presentation and Data Analysis -           -           -           48

4.3       Test of Research Hypotheses            -           -           -           -           -           58

4.4       Discussion and interpretation of Results        -           -           -           61

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.1       Introduction     -           -           -           -           -           -           -           -           66

5.2       Summary        of Findings -   -           -           -           -           -           -           66

5.3       Conclusion      -           -           -           -           -           -           -           -           67

5.4       Recommendations     -           -           -           -           -           -           -           68

5.5       Suggestions for Further Research     -           -           -           -           71

Bibliography    -           -           -           -           -           -           -           -           72

Appendices     -           -           -           -           -           -           -           -           77

LIST OF TABLES

Table 4.1 Descriptive Statistics-         -           -           -           -           -           51

Table 4.2 Correlations Matrix -           -           -           -           -           -           53

Table 4.3 Model Summary     -           -           -           -           -           -           54

Table 4.4 Coefficients -           -           -           -           -           -           -           57

CHAPTER ONE

INTRODUCTION

1.1       Background to the study

A capital market is a segment of a nation financial system where the main article of trade is medium and long-term financial instrument. Such instruments are generally referred to as securities because of the level of confidence and assurance or guarantee it gives to the investor on the repayment of their principal. It is true that the rate of economic growth of any nation is inextricably linked to the sophistication of its financial market and specifically it’s capital market efficiency. Financial markets assist the nations of the world the needed financial resources and skills for growth and development of their various economics.

According to Adebiyi (2005), equity markets in developing countries until the mid-1980s generally suffered from the classical defects of bank dominated economics that we shortage of equity capital lack of liquidity, absence of foreign institutional investors, and lack of investor’s confidence in the stock market. The importance of capital markets lies in its financial intermediation capacity to link the deficit sector with the surplus sector of the economy. The absence of such capacity robs the economy of investment and production of goods and services for societal advancement.

Akingboungbe (1996) stated that funds could thereby be idle at one end, while being sought at the other end in pursuit of socio-economic growth and development. The funding requirements of corporate bodies and government are often huge, something running into billions of naira. It is therefore, usually difficult for those bodies to meet such funding requirements solely from internal sources, hence they often look up to the capital market. This is because the capital market is the ideal source as it enables corporate entities and government to pool monies from a large number of people and institutions. Thus, the socio-economic function of the capital market is well established. “It does not only encourage and mobilize savings but also efficiently allocate such savings to areas of need” (Ekineh, 1996).

The Nigerian capital market is sub-divided into primary and secondary markets. New securities are issued in the primary market and companies issuing these securities receive the proceeds for the sale. The secondary market provides a forum for the sale of existing securities by one investor to another investor. Thus, the efficient functioning of the market has paved way for the primary market by making investors more willing to purchase new securities in anticipation of selling such in the secondary market. These securities are the major instruments used to raise funds at the capital market in Nigeria.

It is in recognition of the importance of a virile capital market that this study is set to appraise the role of the capital market on economic development in Nigeria.

1.2   Statement of the Problem

A viable capital market that leads to economic growth and development is what a growing economy like Nigeria needs. Crisis in the capital market lead not only in loss of money and confidence by investors but deprive them of the needed funds to carry on their investments.

There is abundant evidence that most Nigerian businesses lack long-term capital. The business sector has depended mainly on short-term financing such as overdrafts to finance even long-term capital. Based on the maturity matching concept, such financing is risky. All such firms need to raise an appropriate mix of short and long-term capital (Demirguckunt and Levine 1996).

Most recent literatures on the capital market have recognized the tremendous performance the market has recorded in recent times. However, due to low level of literacy regarding investment in the country, many prospective investors need to be encouraged or informed about the activities of the Securities and Exchange Commission to make investment decision. This research is aimed at examining the impact the capital market has on economic development of Nigeria.

1.3   Objectives of the Study

            The main objective of this study is to examine the extent of the relationship that exists between the Nigerian capital market and economic development of Nigeria. This study specifically seeks to accomplish the following objectives

1.    To examine the extent of the relationship that exists between market capitalization (MCAP) of the Nigerian capital market and the gross domestic product (GDP) of Nigeria.

2.    To examine the extent of the relationship that existed between all share index (ASI) of the Nigerian capital market and the gross domestic product (GDP) of Nigeria.

3.    To examine the extent of the relationship that exists between the numbers of deals (NOD) traded on the Nigerian capital market and the gross domestic product (GDP) of Nigeria.

4.    To examine the extent relationship that exists between the Values of transactions (VOT) traded on the Nigerian capital market and the gross domestic product (GDP) of Nigeria.