The Capital Market In The Mobilization Of Funds For Industrial Development (The Nigerian Case)
The Nigerian capital market came into prominence when the Nigerian enterprise decree, which is also known as the indigenous degree was promulgated in 1972, and amended in 1977. The public became aware of the importance of Securities Avenue for industrial development, especially through the introduction of privatization and the N25 billion capital base for banks. Market in the developing economy was stock exchange established in 1961 as Lagos stock exchange in 1977, was used as a case study.
It was found out that Italy market despite some problems or shortcoming have helped in development of industrial sector with the involvement of Nigerian stock exchange market, which have been machine in for mobilizing private and public savings and making them available for productive investment through share and stocks. Also it has provided a meeting place for dealing members to buy and sell existing stocks and shares which is an avenue for raising new capital for industrial development.
The statistics were gotten through the use of primary data and secondary data where inferences were drawn to arrive at a given conclusion.
Table Of Contents
- Title page
- Approval page
- Table of contents
- 1.1 Background of the study
- 1.2 Statement of the problem
- 1.3 Objectives of the study
- 1.4 Research of the questions
- 1.5 Significance of study
- 1.6 Scope of the study
- 1.7 Limitations of the study
- 1.8 Definitions of terms
2.0 Literature Review
- 2.1 Introduction
- 2.2 Historical background of Nigeria capital market
- 2.3 Challenges of capital market
- 2.4 Operations of the capital market
- 2.5 Control of capital market
- 2.6 The impact of Nigeria stock exchange in the economy
- 2.7 The capital market in the mobilization of fund for Industrial development
- 2.8 Comparative analysis of money & capital market
- 2.9 Objectives of money and capital market
- 2.10 Instrument of money and capital market
3.0 Research Design and Methodology
- 3.1 Introduction
- 3.2 Research design
- 3.3 Source/method of data collection
- 3.4 Population & sample size
- 3.5 Sample techniques
- 3.6 Validity and reliability of measuring instrument
- 3.7 Method of data analysis.
4.0 Presentation and Analysis of Data
- 4.1 Introduction
- 4.2 Presentation of data
- 4.3 Analysis of data
- 4.4 Analysis of research question
- 4.5 Interpretation of result
5.0 Summary of Findings, Conclusion and Recommendation
- 5.1 Introduction
- 5.2 Summary of findings
- 5.3 Conclusion
- 5.4 Recommendations
1.1 Background Of The Study
The capital market is the market for dealings (that is lending and borrowing) in long term loanable fund. The market is the source from which industry obtains its capital for establishment, expansion and modernization and from which the government borrows on long-term basis for development purposes. It offers access to variety of financial instruments that enables economic agents to pool price and exchange risk. Through assets with affricative yields, liquidity and risk characteristics, it encourages savings in financial form.
This is very important for government and other institutions in need of long term funds and for suppliers of long-term funds who because of the nature of their liabilities undertake to maintain part of their assets in the relatively liquid form (Ekezie 1997)
According to Kanu N.O.N (2004) capital market refers to that market for the mobilization of medium and long term funds from the surplus units for allocation to the decifit unit of the economy.
1.2 Statement Of The Problems
Although the capital market has contributed significantly to the mobilization of funds for industrial development of the Nigeria economy, certain lingering problems still constrains its optional operations, they include:
This has resulted to delays in effecting transactions between issuing houses brokers, dealers, registrators, inventors, and their bank. The drag in the delivery service discourages many inventors who sometimes view with distrust their registrars and brokers within share certificates are undelivered or proceeds of share sold not delivered promptly. Also infrastructural limitations insulate many investors especially those in the rural areas from broker dealer there by, trading in securities which would have aided development
- Ignorance also on the part of most members of the Nigerian public as to the meaning of shares and stocks as well as benefits derivable from market operations.
- Reluctance of the Nigerian businessmen to go to public for the fear of losing control of family business.
- Macro-economic instabilities and high cost of raising funds in the market.
- Political instability which makes returns and premiums uncertain and there by discouraging prospective investors both local and foreign.
1.3 Objectives Of The Study
Having the above problems in mind as militating against the development of capital market, the purpose of this study is to determine
- Contribution of the capital market to the economic growth.
- The possible strategies to enhance the efficiency of the capital market.
- The relevance or usefulness of Nigerian stock market in the developing economy.
1.4 Research Question:
- How can capital market provide a local market for borrowing and lending of long term funds for the economic development of Nigeria?
- Is it possible for the lack of public awareness to militate against the realization of the potential of the stock market fund mobilization?
- How can the capital market help in the mobilization of fund for industrial development of a country?
- Which instrument is more often used by the capital in raising fund?
- What ways do you think that the Nigeria capital market will be improved?
1.5 Significance Of The Study
This study will be of importance to individuals, private and public companies, financial institutions, government parastatals, as it will enable them to understand how capital market help in the mobilization of fund for industrial development. The part of stock exchange in mobilizing the funds needed for investment by them.
This is important also because it will encourage the investors to invest into the stock market with the full assurance that their investments are intact.
1.6 Scope Of The Study
This research work resolves on the Nigerian stock exchange and how it aids the capital market in the mobilization of fund for industrial development. It is important to note that the capital market is not a single entity; rather it is a network of specialized financial institutions that In various ways brings together suppliers and users of capital which will be fully emphasized in this study. It will also examine the various regulatory bodies of the capital market specially the Nigeria stock market, its operations and impact in the economy generally.
1.7 Limitations Of The Study
In the case of this research I encountered few constraints; the reluctance of some respondents to volunteer information because they did not believe the assurance given to them that the data collected were purely for academic purposes. Other limitations include financial and time constraints as this report writing was combined with attending of lectures.
1.8 Definition Of Terms
Some terms or concepts have various meanings depending on who or how it is used.
The terms in this study are used in the following context.
It is used interchangeable with the stock market which is an integral part of the countries, financial system where money securities are bought and sold.
A share holder is one who holds a share certificate, who has a legal title to shares. It is also called or referred to as stock holder.
It is made up of a number of bonds, stock or share selected from a list of various traders or business with their market price added together.
It is the buying and selling of goods with the objective of gaining from differences in prices.
One who speculates on the stock exchange by subscribing to a new issue with the hope of selling his allotment at a profit as dealings.
an individual who sells securities that he does not own or which he does not want to deliver in the hope that they can be repurchased at a profit before delivery has to be made.
It is a term for equity or common stock.
An intermediary who buys or sells shares on behalf of a client.
They refer to various promissory documents adopted as evidence of claim in the market.
It is where securities are offered for sale in the public from the issuer for the first time.
It is where people or investors can buy or sell previously quoted securities can get their money back for alternative uses.
5.0 Summary, Conclusion And Recommendations
This research was designed to study the capital market in the mobilization of fund for industrial development. Empirical data was collected through questionnaires interviews and journals etc.
5.2 Summary Of Findings
As said early that this research is carried out to the know the purpose of capital market in the mobilization of fund for industrial development. The responses to the questionnaires were analyzed and relevant ones were subject to test of significance. Some conceptual issues were also examined which includes the challenges of the capital market, the operations of the stock market which entails the use of primary market for the issuing of new shares and secondary market for existing securities. Followed by the ways capital market is controlled and why it should be controlled.
Furthermore, it examined the impact of Nigerian stock exchange in the economy. The capital market in the mobilization of fund for industrial development and a comparative analysis of money and capital market were taken into consideration.
The research work also identified the outstanding problems with the view of getting possible strategies to enhance the efficiency of the capital market and discovering the relevant of Nigerian stock market in fund mobilization for industrial growth.
Finally, it is to clear that the capital market in Nigeria like in all developing economies, its strategies to the overall national economy development. Therefore, the assistance of government is needed in creating more public awareness, create infrastructures and encourage more transparency and independence etc. in other to motivate the corporate users of capital and investors in general and enable the Nigerian stock exchange to render financial services capable of stimulating the nation’s industrial growth.
Based on the findings of this study, the Nigerian capital market was seen as an important medium for fund mobilization and the Nigerian stock exchange was seen as an important instrument used.
For example, the response to question 12 of the questionnaire, ten (10) respondents were 100% sure that the Nigerian stocks exchange market is an efficient instrument in the capital market. Twenty (20) respondents were 20-50% sure while only five (5) respondents were not sure it was also discovered that the capital market has been able to achieve this through the raising of long term funds by quoted companies and channeling this funds to project which include industrial development and growth.
Also from my findings, it was agreed upon that the capital market has reduced over-reliance on the money market, were 25 respondents said that it was achieved through lending for long term purpose and raising fresh funds in the market and only 10 (ten) respondents agreed only on the lending for long term purpose (derived from question 13 of the questionnaire) this has enabled the capital market to mobilize domestic savings from productive investments, promoting of growth of financial service and various forms of institutional savings such as pension funds. A number of problems have however continued to performance. Nevertheless government has been asked in the cause of this work to help reduce the lingering problem of inadequate technology, high cost of raising funds on the market, strengthening of the internal structures and the operations of the capital market institution.
In other to achieve a high modernized and effective market, which would increasingly raise the long-term funds for industrial and other development projects, this recommendations based on the findings of this study are offered:
- The central bank of Nigeria (CBN) should help to improve the technology such as getting equipments that to enhance transfer and clearing system in the market.
- The capital market management should try to develop a wide array of capital market related publication such as bulletins and journals, that is technical and non technical, regular and occasional to educate participants and other persons. The bulletins and journal must be in expensive and widely disseminated.
- I will also recommend that the government besides the control securities clearing system (CSCS) introduced to modernize the market in terms of computerization, there is still need to create more infrastructures like more computers in a more comfortable offices nationwide in orders to make the market closer to the masses.
- The government should try to avoid policy that in polices that will not give the market autonomy but rather encourage independency and transparency in order to achieve a remarkable progress in the next millennium.
- Participant and companies should be encourage to source for their long term funds through capital market in other to make the market strange and vibrant.
The Capital Market In The Mobilization Of Funds For Industrial Development (The Nigerian Case)
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