Capital Market And Its Impact On The Nigeria Economy With Particular Emphasis On The Stock Exchange

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Capital Market And Its Impact On The Nigeria Economy With Particular Emphasis On The Stock Exchange


Abstract


The purpose of this study is aimed towards the impact of stock exchange in the Nigeria economy.
In other words, the development of the economy cannot be ensured if the market itself is not well developed.
In the same vain to spotlight factors that contribute to the gradual growth of stock exchange are the government policy and operation of the Central Bank before the exchange was established. They facilitate the issuing of securities.

I have made an attempt through questionnaire and interviews to know if the stock exchange is not intensive because most individual are ignorant and also the underdevelopment of stock exchange is not intensive because most individual are ignorant and also the under-development of stock exchange.

After careful analysis of answers from the respondents, I found out that, it was noticed that despite the shortcomings found existing in the stock exchange, it’s creation was necessary and it has added value to the economy of the country and also under development was due to pricing policy by the government, communication system, cast of registering, level of literacy in the country and information made available to the public. Based on the constraint, some recommendation’s were however made by the research such as arranging more seminars and symposium to enlighten people. The computer system which is being installed should be done in full measure and not half measure.

From this the stock exchange can help in developing the economy only if the stock exchange is well handled by the economy.


Chapter One


1.0 Introduction

The stock market commonly known as the stock exchange is encompassed in the capital market.
It can be described as a place where savers and investors are brought together to trade on securities and sources of finance. It has basically, the same functions as any other financially institution which comprises the financial system.

The stock exchange plays an important role in the development of our economy. A developed financial system they say is a developed economy. The primary aim of every nation I believe is to improve the standard of living existing in the country. How does this need relate to the stock exchange and its activities? Has it been successful in this particular area? It should be borne in mind through that the economy of any country is a very complex issue especially in the case of Nigeria. Since its establishment which was necessary due to same pressing factors, the economy has undergone a lot of drastic changes.

As will be discussed later, the impact of the stock exchange in the business world of Nigeria has in some way benefited the country. Whether it has done so successfully or not will be determined not just over its short history but also in the future years to come.

Although other means of raising funds exists, the stock exchange no doubt adds more sophistication and thus efficiency which is necessary for every developing country in this case Nigeria.

The project has been embarked on mainly to give a general idea on the life of the exchange and its operation. It also hopes to point out certain deficiencies associated with it and the viewpoint of different individuals, firms and companies on it. In doing so, this project has been divided into different chapters, each discussing a vital point or aspect.

This first chapter centers mainly on the purpose of this study, it’s objectives, significance and limitations associated with it. It will help to highlight certain problems relating to the exchange and its use.

The next chapter is just a simple discussion the stock exchange. It is the literature review of this project. It tells us what different author’s have said in relation tot his topic and also their point of view on this topic.

Chapter 3 is a brief narration on how the research on this project has been carried out, the difficulties encountered and what type of facts and sampling I have based this project on.

The last two chapters on the other hand is detailed analysis on this project. It is the main basis on which this project falls on. Date analyzed here are data got from the general public form this I was able to draw some conclusions and deduce certain facts which have all been summarized in the last chapter.

Various means have been embarked on to make this project possible. It has been worthwhile through because as a friend put it, no person can hope to carry out an effective, influential and flourishing business if he is not well versed on the financial market.


1.1 Problem Statement

This importance of a developed economy, can never be over emphasized. An efficient stock market goes a long way in carrying out this functions.

This fact is not withstanding, we fined out that a lot of people in this country are not even aware of the stock market, it’s functions and how it can facilitate the development of the economy. In an under – developed economy like ours, the need for this market is paramount of the economy is expected to be improved upon.

Another problem associated with the stock exchange is that of development. Trading on the exchange has not been as extensive as was expect. The development of the economy cannot be ensured of the market itself is not only developed. In this problem if it is not checked well, not only defeat the goals of the market as an outlet for finance. This is a major set-back in the development of the economy.

It is obvious that the establishment of the stock exchange is at stake and if nothing is done now, it could gradually be eroded.


1.2 Objectives of the Study

The objective of this project is to present a through study of
the stock exchange and to throw more light on it’s importance in the business world.

The main objective thus are:

  1. To bring closer to have the reality of the stock market by:
    1. Showing it’s development
    2. It’s functions and importance;
    3. It’s impact in the business world and the development of the economy
  2. To highlight the deficiencies of the market
  3. To find possible solutions to these deficiencies.

These objectives I believe should serve to inform fellows Nigerian’s on the activists and importance of thestock market. Also to draw the attention of fellow users of the market to the deficiencies that exist there and possible solutions so as to improve on the deficiencies.


1.3 Significance of the Study

This study is important in the sense that it has to do with the economy of this country.

An under-developed stock market we said means an under-developed economy, thus how standard of loving. Nigeria’s being conservative people, they need to be encouraged to embark on any venture. The stock market being relatively new when compared to the money market, which is also an outlet foe rising funds but short-term ones, confidence in it has to be gradually developed if it is hoped for the market to be a success and for it to carry out it’s functions well. As this study goes a long way to throw more light on this market and its’ function, it is hoped that an awareness will be instilled in it’s readers and the suggestions put towards considered.


1.4 Limitation and Scope of Study

This project centers on the stock exchange (market). A very thoroughly research on this study is not very possible in that interviews and questionnaires have to be limited since only a little sector of the population patronize this market.

Distance from source of information is another problem. The stock exchange is only situated in certain places and so any vital information necessary has to be got on a secondary basis if it is not possible to travel around.

Time factor is also another notable factor. Nobody seems to have time to even fill questionnaires due to pressing engagements. Also combining this project with my other academic work has been very trying and at times interview have been put of due to the work-load I have and the time available to do it.

Another important factor also arises during the collection of data. You find out that people are not ready to talk on any issue which involved. They tend to feel that any information given will implicate them in some ways, so most individuals try as possible to give a rosy picture of the entire procedure even through things that do not happen that way.


1.5 Test of Hypothesis

This study will test the following hypothesis.

Main – hypothesis:

Use of stock exchange is not extensive due to ignorance especially on the part of individuals.

Sub – hypothesis:
  1. Under-development of this market
  2. Confidence in the market’s future development questions which will serve as a guide for the collection data are:
    1. Are you aware of the stock exchange?
    2. Where do you raise your funds?
    3. What are it’s functions and importance?
    4. Do you patronize this market and why?
    5. What are it’s deficiencies?
    6. How can they be over some?

1.6 Definition of Terms

For complete understanding of this project, these terms have been defined:

Financial Market

Market for raising funds, where saving and investment are brought together.

Economic Development

To increase or improve on the welfare of a notion through its productive sector.

Securities

Financial instruments/assets trade in the market to raise fund

Capital

Funds required to finance production of either goods or services.

Investment

Utilization of capital resources for the maximum reward.

Abbreviations:
  • SEC – Securities and Exchange Commission
  • NSE – Nigeria Stock Exchange
  • NEP – Nigeria Enterprises Promotion Acts of 1972 and 1977
  • SSM – Second – tier Securities Market
  • FSM – First – tier Securities Market.

Chapter Five


Findings, Conclusion and Recommendation

5.1 Findings

From the data collected and analyzed, certain fact have bee brought to light.

  1. About an average of 5 out of every 3 persons use the stock exchange and even at that not frequently. Also that these people were not acting on their behalf but that of their companies. This was decided from the various occupations given in the questionnaire. Four or five are managing directors. This also points to another fact, that the people trading on the exchange are mostly trading as companies and not individuals. This does not encourage an individual to participate.
  2. Another notable factor is that the exchange is open to just a sector of the economy. The average layman cannot really by expected to participate.
  3. Another finding is that all the individuals that used the exchange were all male, there was not female, this was deduced from the questionnaires and also from observation of a bidding session. We all know that the female population and if they didn’t participate in the proper growth.
  4. Another finding is that of show growth which the stock exchange has been experiencing since its establishments.
  5. A very important finding through was the amount of ignorance existing on the part of the individuals. They do thing about exchange contribution to the economy, the various activities carried out by it, but yet most of them claimed to be aware of the aims and functions of the exchange.

Other findings were on the issue of development:

  1. That the pricing policy was dominated by the government and weighted by feelings.
  2. That other older existing institution for raising fund exist thereby introducing competition which is not very good for the exchange now at its present level of development.
  3. Also that cost and the protocols involved in registering with the exchange does not make it easy people to invest in the exchange.
  4. Lastly and not the least is that of under-development in carrying out its activities and also that through there is confidence in the exchange future progress, they have to work hard for its.

5.2 Conclusion and It’s Relevance

It can be concluded hence that most individuals do not use the exchange due to a number of reasons.

  1. Ignorance being a major contribution
  2. High costs and too much formalities in registering with the exchange to enlighten people. Averts should also be made through the televisions and radio since they are the most effective ways of communication. Also every company should be called upon to brief their employees on the activities of the stock exchange.
  3. The computer system which is being installed should be done in full measure and not half measure timely and accurate information and loans to increase efficiency in carrying out activities.
  4. The pricing policy should be reviewed and a better machines introduced.
  5. More decrease should be passed which will help increase participation.

A lot of recommendation could be put forward but it all depends on the attitude of the policy makers and their acceptance of these recommendations.


5.3 Final Conclusion

The stock exchange of any country can go a long was in helping the development of the economy only if the stock exchange itself is well equipped to handle the economy of the country and all it’s complexities, Nigeria stock to try to over come most of its problems so that it becomes a success. in the development of our economy.


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