ABSTRACT
This
study is an assessment of the performance of the capital market in the
deregulated Nigerian economy from 1986-2006. The research focus was directed
toward a deeper understanding of how capital market performance has impacted on
capital formation and economic growth in Nigeria. We concentrated on two
capital performance indications namely; market capitalization and growth in the
number of listed securities. Secondary data from Central Bank of Nigeria (CBN),
Nigeria Stock Exchange (NSE), and Federal Office of Statistics (FOS), which
were obtained through library research of relevant publications, were used. The
econometric technique of multiple regression analysis was used as the main
estimation tool to measure the degree of relationship between capital formation
and Nigeria’s economic growth respectively and capital market performance
measures. The study was guided by two hypotheses. Both linear and log linear
specifications of each of the relationships were tried. Our hypotheses were
tested with the R2 test and f-test. The major findings of the study
were: that the log linear specifications suit our data more in terms of goodness
of fit, precision of the estimates and tolerable level of multi collinearity
and that capital market performance has both significant and positive impact on
capital formation and economic growth in the deregulated Nigerian economy. The
study concluded that to increase the level of capital formation in Nigeria and
enhance economic growth of the country, efforts should be made to enhance the
performance of the capital market but how fast the market moves to assume its
rightful position as a major channel of capital formation needed for Nigeria’
rapid economic growth will depend on how fast the major obstacles impeding its
performance are dispensed with. It recommended some measures to be implemented
to enhance the performance of the Nigeria capital market. Like The regulatory
and supervisory framework needs to be continuously reviewed and strengthened to
embrace the activities of the market, emphasis on transparency and
accountability on all aspects of economic management and corporate governance,
etc.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The
capital market is a financial market that provides facilities for mobilizing
and dealings in long-term funds for economic growth and development. Wilkinson
(2007) defines capital market as "any place or system where the
requirements of business enterprises and public authorities or governments for
medium and long-term capital funds can be met". It is the market in which
corporate equity and long term debt securities that is shares and bond (those
maturing in more than one year) are issued and traded.
Ajie
(2002) is of the view, "that pivotal role of the capital market in any
economy could have been dispensed with, if a firm or even an individual for
that matter could operate in a financial vacuum". As a matter of fact, it
is because firms for example, operate in close contacts with various financial
intermediaries and markets that they are afforded not only the mechanism
through which their idle funds can be invested but also one that is capable of
satisfying their needs for additional funds.
As
observed by Okereke-Onyiuke (2000), raising funds from the Capital Market makes
possible among others, the construction of factories, offices, buildings,
highways, bridges and the acquisition of machineries. This opportunity which
the Capital Market offers facilitates capital mobilization and allocation among
several competing activities.
In
theory, Capital Markets are intended to provide investors and borrowers with a
wide range of trading and investment vehicles and to better mobilize and
allocate a country's financial resources and support economic growth. This
market brings together all the providers and users of capital. Buying stock
allows investors to gain an equity interest in the company and become part
owner. When investors buy bonds, they essentially loan money to the company or
government that issued the bond and
There
is empirical evidence strongly suggesting that well functioning capital market
promote long-run economic growth. In particular, Levine and Zervos (1998) find
that indicators of capital market performance such as market capitalization,
turnover, growth in the number of listed securities, and so on are correlated
with economic growth and its sources - total factor productivity growth and
capital formation.
In
the recent past, capital market performance has received increased attention
among governments and development finance institutions, with emerging market
accounting for a growing share of the worldwide boom in the capital markets.
Countries at different levels of development are promoting the performance of
their capital markets with the expectation that these efforts will pay off in
terms of faster economic growth.
In
Nigeria, the role of the capital market in economic growth of the country has
continued to attract increased attention from the government and market
practitioners. Al-Faki (2008), emphasizes that "the Nigerian capital
market has experienced considerable growth in the last decade. In the last year
alone(2007), the Nigerian Stock Exchange all-share index has almost doubled to
51,000 points, and market turnover has also increased". According to him,
the factors responsible for this growth of market are firstly, public
enlightenment programmes that the Commission carries out periodically to reach
and enlighten the public all over the country. Other factors are the reduction
of the cost of transaction which has enhanced competition in the Nigerian
capital market. The Commission, in collaboration with other stakeholders, has
also continued with the efforts aimed at promoting the reactivation of the bond
market in Nigeria.....
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Item Type: Postgraduate Material | Attribute: 92 pages | Chapters: 1-5
Format: MS Word | Price: N3,000 | Delivery: Within 30Mins.
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