ABSTRACT
One
of the major economic objectives of every nation is to maintain a sustained
increase in economic development, through a continuous rise of the economic
indicators like the Gross Domestic product (GDP) and capital formation. For
this to be achieved, industries must be built and adequately maintained.
However, industrialization requires huge amount of fund which can be available
through the pooling together of numerous savers fund. The Capital Market is the
medium through which this fund can be sourced. In the light of the above, the
study aimed at evaluating the role of the Nigerian Capital Market on the
industrialization of the economy. However, the objectives of the study include;
examining the extent which the capital market has boosted industrialization in
Nigeria; how capital market has enhanced capital formation; ascertain the rate
of growth in capital market development; and to proffer recommendations. The
study covered a period of seven years. Being an Expo Factor research design,
Regression Analysis was used to test the hypotheses using the following
variables; Gross Domestic Product (GDP), Industrial loan from the capital
market, manufacturing sector Capital Utilization Rates .It was found out that
the capital market had no significant positive impact on industrial
development. On the other hand, it was found out that the capital market
enhanced capital formation within this period. However, this was a matter of
chance from the model, in that, the capital market cannot enhanced capital
formation if it capital market had no significant positive impact on industrial
development.
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
One of the cardinal economic objectives of the developing countries is to
achieve high economic growth that will lead to rapid economic development and
reduce poverty. Economic growth means a sustained increase in per capita
national output or Net national product over a long period of time. This
implies the ability of an economy to increase the production of goods and
services with the stock of capital and other factors of production available
within the economy. It is therefore assumed that a high level of capital
accumulation, with the right combination of other factors of production will
bring about higher out-put growth. Economic growth has been theoretically and
empirically established to be dependent on capital accumulation or investment.
For
government to achieve its desired objective of high economic growth and rapid
development, it must pursue policies that will increase both the public and
private investments. Such investments lead to industrialization.
Industrialization is described as the methods used to increase productivity. It
is a system by which a society (a nation) gets its wealth through industries
and machinery. If a country industrializes, it develops a lot of industries, and
this will promote economic growth and development.
The early stages of industrialization require systematic policy measures
to steer resources into the productive process. It is a known fact that the
investments that promote economic growth
and
development requires long term funding, far longer than the duration which most
savers are willing to commit their funds. Hence, there is need for long term
supply of fund for industrialization. This vacuum is filled by the activities in
the capital market.
Capital market is a collection of financial institutions that are set up
for granting medium and long-term loans. It is a market for government
securities; for corporate bonds; for the mobilization and utilization of
long-term funds for development. It is the long-term end of the financial
system. In this market, investors provide long term funds in exchange for
long-term financial assets offered by borrowers. The market has both the new
issues securities market (i.e. Primary Market) and already existing securities
market (the Secondary Market). Such securities might be raised in an organized
market such as the Stock Exchange. In this sense, it may involve consortium
underwriting, syndicated loans and project financing. Thus, it is a mechanism
whereby economic units that are desirous to invest their surplus funds,
interact directly or through financial intermediaries with those who want to
procure funds for their businesses.
sMore
so, the capital market synchronize the divergent preferences for portfolio
managers and financial institutions while providing avenues for savers to
invest when the need arises through the secondary market, without affecting the
operations of the firms which their savings had earlier financed. In other words,
through the secondary market, the capital market converts short term investment
to long term or perpetual investments are enlarged and economic growth
accelerated.
The capital market is therefore very important to
any economy because, it encourages savings and real investment in any healthy
economic environment. Through the market, aggregate savings are channeled into
real investment that increases the capital stock and therefore the economic
growth of the country.
1.2 STATEMENT OF PROBLEM
As already stated, the desire of every nation is to achieve economic
advancement and to improve the standard of living of its citizenry. A major
engine of economic growth of any nation is its capital market. It impacts
positively on the economy by providing financial resources through its
intermediation process, for the financing of long-term projects. The projects
could be promoted by governments or private sector institutions. They are
usually in such areas as infrastructure, agriculture, solid minerals,
manufacturing and other real sector areas. Hence, without an efficient capital
market the economy may be starved of the long term funds for sustainable
growth.
Having been acquainted with
the fact that the capital market of any nation is the major engine of her
economic growth and development; therefore, it is pertinent to carry out a
performance evaluation of such an important sector with regards to its
contribution towards the nation’s industrialization which enhances economic
growth.....
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Item Type: Postgraduate Material | Attribute: 98 pages | Chapters: 1-5
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