AN ASSESSMENT OF THE CONTRIBUTION OF CAPITAL MARKET IN THE NIGERIAN ECONOMY

CHAPTER ONE
INTRODUCTION
1.1  BACKGROUND OF THE STUDY
Before the introduction of money into the economy, buying and selling were done in terms of exchange of goods and services which is known as the barter economy. Savings then was in terms of real commodities and therefore had its shortcomings. Such shortcoming include the risk of damages to commodities being shored, coincidence of want, measurement problems etc. With the introduction of money in one form or another, money has been playing and will continue to play a vital role in the process of economic growth and development. It has been generally accepted that a developed financial system is always at the center in any economy and is the framework within which capital formation takes place. This process is made possible by intermediation of financial institutions like banks and non-banking financial institutions. The intermediation provides the efficient systems of mobilizing and allocating available resources for productive investment in the economy. The activities of this intermediation of financial institutions are carried out in the market known as financial market which is further divided into two, the money market and the capital market. The capital market is the long term end for financial market. Capital market is the subject matter of this project study. The contribution of the capital market as a tool for development in the Nigerian economy was recognized and mentioned by Mr. Fisher in his report on the advisability on the establishment of Central Bank in Nigeria when he wrote that: He could not imagine how a Central Bank could operate efficiently where money and capital markets do not exist or totally underdeveloped. To ensure that capital is efficiently allocated between competing ends and also to channel savings into investment for economic growth and development, it is important to develop a well conducted capital market within the financial framework. The development of capital markets dates back to 1946 when the first government securities were floated. The first institutional facilities came into existence between 1959 and 1961 with the aim of proving funds for industries and governments to meet long –term capital requirements. Such as financing for fixed investments –building, plants, bridges etc to contribute to the Nation’s development.

1.2  STATEMENT OF THE PROBLEM
A research work of this nature is aimed at resolving certain issues and attendances that tend to limit human knowledge on that sphere. In stating the problems, it must be realize that the intention of this work is to assists the Nigerian capital market to grow actively, hence it looks into the different problems been faced and how this problems can be reduced or eliminated. Amongst problems faced by the capital market is the lack of awareness and interest of individuals who do not know that a capital market exist, not to mention its roles and how it can possibly facilitate the development of the economy. In an underdeveloped economy like ours, the need for this market is paramount if the economy must be improved upon. Another problem associated with capital market is the government intervention in the system. It is noteworthy that stringent government polices being introduced into the market has not made it possible for the operators to achieve the goals for which the system is established.
Besides the government intervention is the existence of political instability which the economy has gone in the past years. This has hindrances which held some willing investors in the system because every government of the day comes in with its own policies. The irony of it all is that these policies are oen not pursued to their logical conclusion.

1.3  OBJECTIVES OF THE STUDY
In the continuing era of deregulation, the financial market as a whole has received several criticism as well as praises for its failures and contributions. The following are some of the objectives of this study.
i. Educating investors to know about the roles of capital market in economic development.
ii. Enlightening individual players in the capital market and outsiders on the contributions of the capital market in the economy.
iii. Advising government on the adverse effects that their frequent interventions has on the economy as well as pointing out the right institutions to formulate economic polices.

1.4  SCOPE AND LIMITATION OF THE STUDY
The stock exchange market is the centre of the capital market. The researcher therefore narrows down this study to the contributions and functions of the stock exchange market. Nevertheless, other securities market will be death with. These are the various factors that have limited the researcher’s efforts in the course of carrying out this work. Obviously, a very thorough research on this subject is not possible because interviews and questionnaires have to be administered only to a little sector of the population that patronises the market and other individuals in the society. Distance from the source of information is another limiting factor. The market is situated in specific places and so any vital information necessary have to be received on a secondary basis if traveling becomes impossible as a result of the risk and financial involvement. Time constraint also militate against thorough efforts and has reduced the intensity of the research work. Another limiting factor to the study is that people are unwilling to give information on any issue that involves the economy in which the government is involved. They tend to feel that any information offered might implicate them in some ways.

1.5  RESEARCH HYPOTHESIS
A research hypothesis is a tentative statement or agreement about relationship that exist between two or among many variables. It is a guess statement about relationship and needs to be tested and subsequently be accepted or rejected. Statistical hypothesis has both the null and alternative hypothesis designed “Ho and Hi’ respectively. The hypothesis to be used for this study are as follows:

HYPOTHESIS ONE
Ho: Nigerian capital market has not contributed to the development of the economy.
Hi: Nigerian capital market has contributed to the development of the economy.
HYPOTHESIS TWO
Ho: Government has not intervened in the operation of the capital market.
Hi: Government has intervened in the operations of the capital market.
HYPOTHESIS THREE
Ho: There is lack of awareness in the capital market
Hi: There is adequate awareness in the capital market

1.6  SIGNIFICANCE OF THE STUDY
This research work shall be beneficial to students in related field of study who will find it educative and informative. Business units that were uniformed about the existence of capital market as a source of long-term financing stand to be informed. Government can through this study know what constructive steps to take to enhance the performance of capital market as a tool for economic development. Managers and operators of the market stands to benefit from the study as a recommendation and suggestions would improve performance.

1.7  DEFINITION OF TERMS
The terms below are used in the course of this project work
1. NSE- Nigerian Stock Exchange
2. SEC- Securities and Exchange Commission
3. SSM- Second-tier Securities Market
4. CAPNET – Capital Network.

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