The effectiveness and growth of capital
market in Nigeria economy is a problem that has assumed of recent an
intractable dimension. The concept market is one of the compartments of
financial system that promotes harm and investment in an economy. The
stock exchange market is one of the key institutions of the capital
market, a network or individuals, institution and instrument involved in
the effective channeling of funds from the surplus to deficit economic
The question whether a market undergone
growth and development or not cannot be adequately answered by simply
‘Yes or No’ there are some issues to be addressed.
The main purpose of this study is to
show how investors can dissever when a market has attained growth and
development for their top investors to know the correctiveness of a
price, which depends on the use of the information at time of the price
Finally the study is designed to cover
the practical and theoretical area of the stock market. The study is
about the market and how effective it is in setting prices, which
reflect the worth of the securities, traded in the market.
TABLE OF CONTETNS
CHAPTER 1: INTRODUCTION
1.1 Statement of research Problem
1.2 Objective of the Study
1.3 Research Question
1.4 Limitation and Scope of the Study
1.5 Justification of the Study
1.6 Research Methodology
1.7 Statement of the Hypothesis
1.8 Plan of Study
1.9 Definition of Terms and Concept
CHAPTER II: LITERATURE REVIEW
2.1 Concept of Capital Market
2.2 Role of Capital Market
2.3 Efficient Market Hypothesis (EMH)
2.4 Capital Market Development and Successful Operation
CHAPTER III: THEORETICAL FRAMEWORK
3.1 Evolution of the Nigeria Capital Market
3.2 Structure of the Nigeria Capital Market
3.3 Regulatory Body in the Capital Market
3.4 Instrument of Capital Market in Nigeria
3.5 The Benefit to Companies in the SSM
3.6 Growth and Significant of the Capital Market
3.7 Contribution of the Stock Exchange to Capital Formulation
3.8 Problems of the Nigeria Capital Market
3.9 The Impact of Liberalization policies in the Nigeria Capital Market
3.10 Reform of the Nigeria Capital Market
3.11 Depth of market
CHAPTER IV: METHODOLOGY AND ANALYSIS
4.1 Evaluation criteria
4.2 Data Presentation
4.3 Data Analysis
CHAPTER V: SUMMARY, RECOMMENDATION AND CONCLUSION
1.0 BACKGROUND TO THE STUDY
The rate of economic development of any nation is inextricably linked to the sophistication of its financial markets.
Financial markets assist the nation of the world to give the needed financial resources and skills for growth and development.
Apart from promoting a sound and efficient payments mechanism, the financial intimidation.
The financial market is an institutional
arrangement that facilities the intermediation of funds in an economy.
By financial intermediation, it means mobilization of financial
resources from surplus spending units and the channeling of such to
deficit spending units and the channeling of such funds to deficit
spending units for production investment and the generation of assets or
securities in the process.
Thus the financial system generates a
wide range of financial instruments (assets), which are means of
transferring purchasing power and are tailored to suit the time
preferences of both lenders and borrowers.
The financial market performs an
economic function by facilitating the transfer of real economic
resources from the lenders to the borrowers. By the inducement of
interest income, the market facilitates the transference of purchasing
power from the lender to the investor who wishes to exercise demand over
When the financial market is efficient,
funds flow freely and rapidly among its various sources and uses. As
long as financial instrument remains substitutable for each other,
changes in supply and demand in the money market have a rapid over
effect into the capital market.
Financial markets are therefore
constitutional whenever participants with aid of infrastructure
technology and over devises facilitates the mobilization and channeling
of funds into productive investments. The importance of the financial
market lies in financial intermediation to link the deficit sector with
the surplus of the economy. In the intermediation process, financial
intermediaries engage principally in matching lenders and borrowers.
They bring savers and borrowers together by selling debt instruments or
securities and deposits to savers for money and lending that money to
borrowers. As a result, the lenders of investors receive claims on
investment, which have stable market value and high liquidity.
Financial intermediation does not ensure
from direct lending and borrowing process but arises from the
lending-borrowing proves, which involves the generation and exchange of
debt instrument or securities. The point of emphasis therefore is the
financial intermediaries use their own liabilities to create additional
assets, help mobilize funds, gather together to reap economics of scale
and minimize the investors.
The financial markets system features a
wide array of banking and non-banking financial intermediaries. The
banking sub-sector of the system comprises Commercial and Merchant
Banks, Development Bank and Central Bank, as the Apex institution.
The non-bank financial institution
sub-sector includes a wide range of organizations operating as
regulators, facilitators and investors. The list includes the
Securities and Exchange Commission Market in Nigeria, to assess its
impacts on Nigeria economy. In order to achieve its major (SEC), the
Stock Exchange, Stockbrokers, Regionals, Insurance companies, Pensions
and Provident funds and Investment Companies.
The financial market is really segmented into two major markets, which are:
1. Money Market
2. Capital Market
The money market is the market for
short-term funds an securities including treasury bills, treasury
certificates negotiable certificates of deposits, commercial paper and
other funds of less than one year duration on the other hand, the
capital market is the market for long-term funds and securities whose
tenure extends beyond one year. These include long-term loans,
mortgage, bond, preference share, ordinary shares, federal government
bonds and industrial loans.
The capital market is a complex
institution and mechanism through which intermediate and long run funds
are made available to government, business (firm) and individuals. The
capital market therefore is an instrumental arrangement that performs
the function of mobilizing private and public savings from surplus
spending units and channeling them to the deficit units for the
production of goods and services. Unlike the many money market which
primarily exist as a means of liquidity adjustment, the capital market
provides a bridge of transforming saving into long term investment by
using equity bonds, debentures, mortgages and investment stocks to
The market makes it possible for private
and public sectors of the economy to rise long-term capital to execute
government development programmes and from the expansion and
modernization of the private business to enhance outputs, employment and
income. The capital market is often described as an important part of
country’s economy, which is indispensable to economy growth and
development. In short, it is a place where nation’s wealth is bough.
The capital market itself is composed of:
1. Primary Market
2. Secondary Market
Operators in the market include Merchant
Banks, Stock broking Firms, Issuing Houses, Development Finance
Companies, the Central Bank, Securities and Exchange Commission and the
Stock Exchange. With this background; this project attempts to review
broad outline the extinction of the Nigerian Capital market, its
functions, growth and development with emphasis on the period and
challenge for the future especially in the lights of the liberalized
trade and exchange regimes adopted under the Structural Adjustment
1.1 STATEMENT OF RESEARCH PROBLEM
The capital market is the long-terms and
of the financial market that is made up of market and institution which
facilitate the issuance of long term financial instruments.
Unlike the more market that provides
basically short term funds, the capital market provides funds to
industries and government to meet their long term capital requirements
such as financial or tried investments building, plant and machinery
bridges and so on.
The following are research problem.
1. Why is there still low level of foreign investment in the market notwithstanding the reform?
2. Is the capital market reform impacting positively on the economy?
3. Is there any on the securities of the capital market attributed to the reform?
1.2 OBJECTIVES OF THE STUDY
The major objective of this study is to
evaluate the growth and performance of the capital market in Nigerian to
assess its impacts on the Nigerian economy.
The following are the objectives of the study.
1. Examine the structures and the
roles of the capital markets in Nigerians and the evolution of the
market including institutional development market.
2. Examine the instruments used in the market and their used fullness.
3. Examines the future prospect of the Nigerian Capital market.
4. Find out the various problems facing the workings and the operations of the capital market.
5. To evaluate the impact of such reforms on the Nigerian capital market.
1.3 RELEVANT RESEARCH QUESTION
1. What is the impact of the capital market on the National Income?
2. What is the effect of the capital market on the share holder investment or in-course?
3. What is the impact of the capital market on the earning per shares (EPS) of the shareholders?
4. What is the effect of the
capital market on the effectiveness: Development of the institutional
in the arrangement for long-term financial assets, such as shares,
debentures stock and mortgage equity bond.
1.4 LIMITATION AND SCOPE OF THE STUDY
The Nigerian capital market since its
inceptions in 1946. These will include involution and impact of the
sector on the growth of Nigeria economy.
Since early 70s and 80s then it because a significant factors in financial system of the economy.
The study will further examine its roles
during the Structural Adjustment Programmes (SAP) and the impact its
plays in the dominance of the country financial base.
1.5 JUSTIFICATION OF THE STUDY
The importance of the capital market in
economic development cannot be over emphasized. There is consensus of
opinion that the nature and the content of the not benefit which the
capital market offer country be judged by the effects on the
mobilization of savings, capital inflow and out flow the mobility of
investible surplus funds, resources allocation, distribution of income
and wealth and the response of economic policies.
Therefore, the development of the
capital market should encourage efficient mobilization of both domestic
and foreign savings for productive investment in order to achieve
economic development. Without productive investment, there will be no
growth and saving and there will be no investment.
1.6 RESEARCH METHODOLOGY
This study will make use of secondary
data. The date at sources from the various publications of the Central
Bank of Nigeria (CBN) such as B. Williams, Economic and financial
Review, Annual Report and Statistical Bulletin: Lagos Publication form
the Nigerian Sick Exchange (NES), Securities and Exchange Commission
(SEC) and other Financial Institution.
1.7 STATEMENT OF THE HYPOTHESIS
1. H0: There is no relationship between Capital market transaction and long
term sources of funds.
H1: There is relationship between Capital market transaction and long term sources of funds.
2. H0: There is no relationship between investment in capital market and the
earning per share (EPS) of the shareholders.
H1: There is relationship between investment in capital market and the earning per share (EPS) of the shareholders.
1.8 PLAN OF STUDY
This study tells us what the evolution functions and impacts of the capital market in Nigeria.
Chapter One is the introduction and
explains what capital market is all about. Chapter Two is the
literature review and it review the work of notable economists. Chapter
Three will be scope of the study and examines evolution, operation and
impact or the sectors on the economy. Chapter Four will be methodology
and its analysis is based on secondary data from central bank of
Nigeria, Nigerian stock exchange commission. Chapter Five will be the
summary recommendation and conclusion giving suggestion and ways to
improve the operation on the Nigeria capital markets.
1.9 DEFINITION OF TERM AND CONCEPT
1. Capital market: The market is concerned with the mobilization and intermediation of long term funds.
2. Data Analysis: This refers to the use of data to analysis the project work. This data include in formulation got from official sources.
3. Methodology: This can be described as the method by which this study will be carried out.
4. Equity: This is the shareholder’s ownership interest in a company represented by their common and preferred stock.
5. Operators in the Market:
They are the players in the stock exchange, this players include the
financial intermediaries for statement long term fund form investors and
allocating some to institution that required them.
This can be defined as documentary evidence of ownership or entitlement
to part of the asset of the issuing organization which may be a
business, firm, and government in government institution.
7. Secondary Market: This exists for the sale and purchase of old securities.
8. Primary Market: This market is for new securities. It is platform where a company or government raises funds for investment purposes.