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TABLE
OF CONTENTS
Title
page – – – – – – – – – – i
Declaration – – – – – – – – – – ii
Certification – – – – – – – – – iii
Dedication – – – – – – – – – iv
Acknowledgement – – – – – – – – v
Table
of Contents – – – – – – – – vi
Abstract – – – – – – – – – – x
CHAPTER ONE
1.0 Introduction – – – – – – – – 1
1.1 Background of the Study – – – – – – 1
1.2 Statement of the Problem – – – – – – 4
1.3 Objectives of the Study – – – – – – 5
1.4 Research Questions – – – – – – – 5
1.5 Hypothesis of the Study – – – – – – – 6
1.6 Significance of the Study – – – – – – 6
1.7 Scope and Limitation of the study – – – – – 7
1.8 Organization of the Study – – – – – – 7
1.9 Definition of Terms – – – – – – – 8
CHAPTER TWO
2.0 Introduction – – – – – – – – 11
2.1 The Concept of Capital Market – – – – – 12
2.1.2 Definition of Capital Market – – – – – – 13
2.1.3 Capital Markets Components and function – – – – 13
2.1.4 Role of Capital Market – – – – – – – 15
2.1.5 Features of the Capital Market – – – – – – 17
2.1.6 Types of Capital Market – – – – – – – 19
2.2 Recent development in the Capital Market – – – – 24
2.3 Prospects of the Nigerian Capital Market – – – – 27
2.4 Challenges of the Nigerian Capital – – – – – 28
2.5 Capital market and Economic Growth – – – – – 30
2.6 Overview of the Nigerian Capital Market – – – – 33
2.7 The Nigerian Security and Exchange
Commission – – 36
2.8 The Nigerian Stock Exchange – – – – – – 38
2.9 Economic Growth – – – – – – – 40
2.10 Impact of capital Market on Economic Growth
and Development in
Nigeria – – – – – – – – – 41
2.11 Empirical Review – – – – – – – – 42
2.12 Empirical Review on Nigeria – – – – – – 44
CHAPTER THREE
3.0 Introduction – – – – – – – – 47
3.1 Research Design – – – – – – – – 47
3.2 Research Area – – – – – – – – 48
3.3 Source of Data Collection – – – – – – 48
3.4 Data Analysis Technique – – – – – – 49
3.5 Model Specification – – – – – – – 49
CHAPTER FOUR
4.1 Presentation and analysis of Regression Results – – – 51
CHAPTER FIVE
5.0 Introduction – – – – – – – – 57
5.1 Conclusion – – – – – – – – – 58
5.2 Recommendation – – – – – – – – 59
References – – – – – – – – – 60
ABSTRACT
This study
investigated the impact of capital market on economic growth and development in
Nigeria. This study was informed based on the gap between capital market growth
in Nigeria and unstable economic growth in the country. Based on this,
identified research objectives include to evaluate the impact of the capital market
on economic growth and development in Nigeria, to access the case with which
firms and businesses in Nigeria can access funds in the capital market and to
identify the challenges facing the market and its impact on businesses in the
country. The research was set to attain these objectives through the analysis
of the following research questions and hypothesis which includes; there is no
significant relationship between GDP and capital market activities which were
measured using market capitalization and All- share index (ALSI). Data required
for the study was collected using secondary sources through Central Bank of
Nigeria (CBN) Statistical Bulletin 2015, and the data collected crossed 30
years (1985-2015). Simple linear regression using Ordinary Least Square
(method) was employed in the analysis of the data. The findings include
thatMarket Capitalization has a direct and significant relationship with Gross
Domestic Product (GDP), while all share index has a negative but significant
effect on Gross Domestic Product (GDP) in Nigeria. It was concluded that
capital market activities in Nigeria has a significant impact on economic
growth and development in Nigeria. It was recommended that there is need for
more reforms in the Nigerian capital market to ensure that there is more
pronounced impact in the economic growth and development in Nigeria, and that
there is need for capital market to promote private domestic investment in
Nigeria to enhance the growth of GDP in
Nigeria,
CHAPTER
ONE
INTRODUCTION
1.0
INTRODUCTION
The capital market in any country is one of the major pillars of long
term economic growth and development. The market serves a broad range of
clientele including different levels of government, corporate bodies, and
individuals within and outside the country. For quite some time, the capital
market has become one of the means through which foreign funds are being
injected into most economics, and so the tendency towards a global economy is
more feasible/visible there than anywhere else. It is, therefore, quite valid
to state that the growth of the capital market has become one of the barometers
for measuring overall economic growth of a nation. Thus, an increase in the
market share of a public limited liability company through the sales of its
shares increases its capital base and encourages expansion leading to a higher
level of growth and productivity. This study will try to clarify these and
related issues.
1.1 BACKGROUND OF THE STUDY
The capital market is a highly specialized and organized financial market
and indeed essential agent of economic development because of its ability to
facilitate and mobilize saving and investment. To a great extent, the positive
relationship between capital accumulation real economic growths has long
affirmed in economic theories. Anyanwu (1993). Success in capital accumulation and
mobilization for development varies among nations, but it is largely dependent
on domestic savings and inflows of foreign capital. Therefore, to arrest the
menace of the current economic downturn, effort must be geared towards
effective resources mobilization. It is in realization of this that
consideration is given to measure for the development of capital market as an
institution for the mobilization of finance from the surplus sectors to the
deficit sectors. (Alile&Anao, 1990). The development of capital market in Nigeria, as in other
developing countries has been induced by the government. Though prior to the
establishment of stock market in Nigeria, there existed some less formal market
arrangements for the operation of capital market. It was not prominent until
the visit of Mr. J. B. Lobynesion in 1959, on the invitation of the Federal
government, to advice on the role the Central Bank could play in the
development of local money and capital market. As a follow-up to this, the
government commissioned and a set up the Barback Committee to study and make
recommendations on the ways and means of establishing a stock market in Nigeria
as a formal capital market. Acting on the recommendation of the committee, the
Lagos Stock Exchange (as it was called then) was set-up in March 1960, and in
September 1961, it was incorporated under Section 2 cap 37, through the
collaborative effort of Central Bank of Nigeria, the Business Community and Industrial
Development Bank.Central Bank of Nigeria (2009). With the establishment of the Central Bank of Nigeria in 1959
and the coming into existence of the Lagos Stock Exchange in 1961 and
Subsequently, the Nigeria Stock Exchange by an Act in 1979, a sound foundation
was laid for the operation of the Nigerian Capital Market for trading in
securities of long term nature needed for the financing of the industrial
sector and the economy at large. After the incorporation of the Lagos Stock
Exchange, it was granted further protection under the law and its activities
were placed under some sort of control by the government, hence the passing of
the Lagos Stock Exchange Act. However, the Lagos Stock Exchange was only
operational in Lagos. By the mid 70’s, the need for an efficient financial
system for the whole nation was emphasized, and a review by the government of
the operations of the Lagos Stock Exchange market was advocated. The review was
carried out to take care of the low capital formation, the huge amount of
currency in circulation which was held outside the banking system, the
unsatisfactory demarcation between the operation of Commercial Banks and the
emerging class of the Merchant Banks, and the extremely shallow depth of the
capital. In response to the problems mentioned above, the government accepted
the principle of decentralization but opted for a National Stock Exchange,
which will have branches in different parts of the country. On December 2nd
1977, the memorandum and article of association creating the Lagos Stock
Exchange was transformed into the Nigerian Stock Exchange, with branches in
Lagos, Kaduna, Port-Harcourt, Yola and in Federal Capital Territory (FCT) Abuja
and some other cities. Ogwunike, F.O.
&Omole , D.A (1996). The history of
Nigeria Capital Market could be traced to 1946 when the British colonial
administration floated a N600, 000 local loan stock bearing interest at 3¼% for
the financing of developmental projects under the Ten-Years Plan Local
Ordinance. The loan stock, which had a maturity of 10-15 years, was
oversubscribed by more than N1 million, yet local participation of the issue
was terribly poor. Certainly, prospects for investment in Nigeria, but the
overriding consideration in this project is to examine the impact of the capital
market in harnessing and mobilizing these resources (funds) to generate
economic growth in the country and consequently economic development.
1.2 STATEMENT OF THE PROBLEM
Some Nigerian businesses do not have access to long-term capital, and
there is enough proof to show it. The business sector has depended mainly on
short-term financing such as overdrafts to finance, long-term project. Based on
the maturity matching concept, such financing is risky. Most recent literature
on the Nigeria capital market has recognized the tremendous performance the
market has recorded in recent times. This study is undertaken to examine the
contribution of the capital market in the economic growth and development of
Nigeria. The delay created by the meagreness
of finance to the economy constitutes a major setback to its development. In
view of this, it is necessary to evaluate the Nigerian capital markets ability
to provide long term funds for growth and development.
1.3 OBJECTIVES OF THE STUDY
The broad objective of this study is to study the impact of capital
market on the economic growth and development in Nigeria. The specific
objectives of the study are as follows:
1. To evaluate the impact of the capital market on economic growth
and development in Nigeria.
2. To access the ease with which firms and businesses in Nigeria can
access funds in the capital market.
3. To identify the challenges facing the market and its impact on
businesses in the country.
1.4 RESEARCH QUESTIONS
This research was guided by the following research questions:
i. What is the impact of the capital market on economic growth and
development in Nigeria?
ii. How can the capital market through its
crucial role stimulate economic growth in Nigeria?
iii. What are the challenges facing capital market
of market operations in Nigeria.
1.5 HYPOTHESIS OF THE STUDY
The hypothesis that would be tested in the course of this research is
stated below as:
Hypothesis 1:
H0:
There is no significant relationship between GDP and capital market activities
Hypothesis 2:
H0:
There is a negative relationship between GDP and market capitalization.
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