Effect Of Capital Market On Investment In Nigeria

Project and Seminar Material for Industrial Relations and Personnel Management

Abstract

This study has attempted to investigate the effect of capital market on investment in Nigeria using the OLS technique to estimate this relationship covering a period of 34 years (1981-2014). It was discovered that for the period under study that market capitalization and inflation had no significant effect with investment however the turnover ratio and value traded ratio are significantly related to investment under the time of observation and also the capital market has a significant effect on investment in Nigeria. It was thus recommended that for improved investment level the country the government and relevant authorities should ensure appropriate and adequate sensitization of investors to invest in the Nigerian Capital Market to provide funds for companies listed on the stock market to have funds to expand and make further investment.

Background of the Study

No nation can achieve sustained economic growth without a financial system. The sourcing of long-term finance through the capital market is essential for self-sustained economic growth, which is consistent with external adjustment and rapid economic growth (Iyola, 2004).

The capital market effectively started operations in Nigeria on 5th June 1961 under the provision of the Lagos stock exchange Act 1961, which transformed into Nigerian stock exchange in December 1977 as a result of the review of Nigerian financial system (CBN, 2007). The Securities and Exchange Commission (SEC) was established in 1979 through the SEC act 1979 to regulate the capital market, but it commenced actual operation in 1980. It took over regulatory functions from capital issues commission, which was established in 1973.

Since then various forms of financial instrument have been issued in the capital market by new and existing business to finance product development, new projects or general business expansion.The Nigerian security and exchange commission (NSEC) is the apex institution for the regulation and monitoring of the Nigeria capital market. The commission was established under the security and exchange commission decree 1979, operating retrospectively from 1st April 1978.