ABSTRACT
The research work was undertaken to asses
the impact of inflation on the Nigerian capital markets. The work was intended
to achieve the following objectives; to evaluate the way inflation affects the
shares of quoted companies in Nigerian Stock Exchange and to examine the impact
of inflation on the price of securities in the Nigerian capital markets.
Relevant data were data collected from both the primary and secondary sources.
Questionnaires was the main primary data collection instrument employed while
data from various relevant publications constituted the sources of secondary
data. Upon the analysis of data, the findings were draw; that inflation reduces
the purchasing power of any currency, which directly affects the activities of
Nigerian Stock Exchange ; that inflation really reduces the amount of patronage
of the shares of quoted companies. On the basis of the findings, it was
recommended that management of Nigerian Stock Exchange should thoroughly stand
up to the challenge of checking inflationary trend in the exchange while the
government should introduce the price control board and monitor other sectors
of the economy whose activities are likely to spring up inflation.
CHARTER
ONE
1.0 INTRODUCTION
1.1
BACK GROUND OF THE STUDY
This study is a modest
attempt at a lucid explication of the perceived impact of inflation on the
Nigerian capital market. Inflation has been define by many economics. According
to Ile (1990:160),he said that inflation is a contentious upward movement in
the general price level. It can also be defined as an intermittent rise in the general
level of prices.
Inflation may involve a
steady but moderate annual rise in the general price level up to about 5%.
Here, the volume of purchasing power is persistently running out of the output
of goods and services so that there is a continuous tendency for price
commodities and factors of production fail to increase with the demand for
them. This types of inflation can be persistent rise in general price level. It
is a situation of too much money chasing too few goods.
At period, the value of
money, because of excessive creation of money results in high increase in
price. This type of inflation is described as galloping inflation, money losses
its function as a store of value and its medium of exchange function may be
affected as people are unwilling to accept it.
According to OBASIKENE
(2003) she noted that capital market is a market for buying and selling of long
term funds. The Nigeria capital market is of two categories namely;
-
Primary market
-
Secondary market
PRIMARY MARKET: this is
the market for the issuance of new securities (securities are document/
papers that are given to show that money was borrowed) the securities sold in
the market are being issued into the market for the first time.
SECONDARY MARKET: Is a
market for trading of old securities. Old securities are securities that
are already in existence.
1.2 STATEMENT OF THE PROBLEM
To avoid the ugly
situation of inflationary trend in Nigeria, the following problems are stated
in the study to find solution, which will help reduce the impact of inflation
in the Nigerian capital market.
The management of the
Nigeria stock exchange has done nothing in checking inflationary trend in the
Nigerian capital market.
The government has not
done anything to monitor other sector of the economy whose activities are
likely to spring up inflation. Also government failed to extend the bank loan
to important sector of economy.
Thus, the problem of this study is to investigate the important of
inflation on the Nigerian capital market.
1.3 OBJECTIVES OF THE STUDY
This
study is designed towards achieving the following major objectives:
1.
To evaluate the way inflation affects the shares
of quoted companies in Nigerian Stock Exchange.
2.
To determine the effect of inflation on the
ability of the economy to purchase securities in the Nigerian capital market.
3.
To ascertain whether the inflationary trends
affects the Nigerian Capital Market Operation adversely.
4.
To examine the level of inflation in Nigeria.
5.
To examine the impact of inflation on the price
of securities in the Nigerian Capital market.
1.4 RESEARCH QUESTIONS
The
research questions for work will be based on the following:
1.
To what extent does inflation affect the shares
of quoted companies in the Nigerian Stock Exchange?
2.
To what extent does inflation effect the
purchasing of securities in the Nigerian capital market?
3.
How far does an inflationary trend in Nigeria
affect the Nigerian Capital market?
4.
What impact does inflation have on the price of
securities?
1.5 FORMULATION OF HYPOTHESIS
The following have been put forward tentatively for the purpose of
developing evidence for or against the preposition in question.
i.
Ho: Nigerian Stock Exchange staff perception is
that inflation does
not
affect the shares of quoted companies
ii.
Ho: Nigerian Stock Exchange staff perception is
that inflation has
no
affect on the pricing of securities on the Nigerian Capital Market.
iii
Ho: Nigerian Stock Exchange staff perception is
that inflationary trends in Nigeria does not affect the Nigerian Capital
iv.
Ho: Nigerian Stock Exchange staff perception is
that the inflationary trend in Nigeria does affect the Nigerian capital market
operations.
1.6 SIGNIFICANCE OF THE STUDY
The
beneficiaries of the research work are as follows:
1
This study is significant to all the students of
banking and finance to enable them know more about the impact of inflation on
the Nigerian capital market. Also to students of other departments who may be
interested in carrying out further research study on capital market.
2
Investor of long-term capital:- lender and
borrowers of long term basis will drive assistance from this work, as it will
enable them to do their homework very well before investing.
3
Management of Nigerian stock exchange in better
policy formation.
1.7 SCOPE OF THE STUDY
This research area and
dimension of coverage are based on the effect of inflation on Nigerian capital
market operations. The work extends to the inflationary impact on the various
aims of the Nigerian capital market. The work also covers the existing forces
that influence the activities within the capital market.
We have Nigerian stock
exchange all over the country but for the sake of this study. Nigerian Stock
Exchange Onitsha was covered.
1.8 LIMITATIONS OF THE STUDY
The researcher is also affected by the usual constraints and problems
prominent in similar researchers in Nigeria. These constraints were summarized
below;
1.
FINANCE: This created a lot of
problems to researcher in cause of carrying out proper investigation of
the research, but this was not enough because of other uses in which it is been
put to.
2.
TIME CONSTRAINTS: The
time available for the research work was very limited with other
assignment and preparation for examination has caused a barrier to the research
findings.
3.
DEARTH OF STATISTICAL DATA INFORMATION: As a
result of lack of documental data, the research work appears to be some how
written for easy understanding.
REFERENCES
Ile, (1999) : Economic for Business Studies; Ochumba
Printing and Publishing company Ltd. Enugu.
Obasikene A C (2003) : Fundamental of Business Finance:
Computer Edge Publishers, Enugu
Odife D.O (1985): Understanding the Nigerian Stock Exchange;
Vantage Press, New York
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