ABSTRACT
One of the major economic objectives
of every nation is to maintain a sustained increase in economic development,
through a continuous rise of the economic indicators like the Gross Domestic
product (GDP) and capital formation. For this to be achieved, industries must
be built and adequately maintained. However, industrialization requires huge amount
of fund which can be available through the pooling together of numerous savers
fund. The Capital Market is the medium through which this fund can be sourced.
In the light of the above, the study aimed at evaluating the role of the
Nigerian Capital Market on the industrialization of the economy. However, the objectives of the study include;
examining the extent which the capital market has boosted industrialization in
Nigeria; how capital market has enhanced capital formation; ascertain the rate
of growth in capital market development; and to proffer recommendations. The
study covered a period of seven years. Being an Expo Factor research design,
Regression Analysis was used to test the hypotheses using the following
variables; Gross Domestic Product (GDP), Industrial loan from the capital
market, manufacturing sector Capital Utilization Rates .It was found out that
the capital market had no significant positive impact on industrial
development. On the other hand, it was found out that the capital market
enhanced capital formation within this period. However, this was a matter of
chance from the model, in that, the capital market cannot enhanced capital
formation if it capital market had no significant positive impact on industrial
development.
TABLE OF CONTENTS
Pages
Title page – – – – – – – – – i
Certification – – – – – – – – ii
Dedication – – – – – – – – iii
Acknowledgements – – – – – – – iv
Abstract – – – – – – – – v
Table of contents – – – – – – – vi-viii
List of tables – – – – – – – – ix
CHAPTER ONE: INTRODUCTION
- Background
of the Study – – – – – 1
- Statement
of the Problem – – – – – 3
- Objectives
of the study – – – – – 3
- Research
Questions – – – – – – 4
- Research
Hypotheses – – – – 4
- Significance
of the study – – – – – 5
- Scope
of the study – – – – – – 6
- Definition
of terms – – – – – – 6
References – – – – – – – 8
CHAPTER TWO: REVIEW OF RELATED
LITERATURE
2.1 Introduction – – – – – – 9
- Evolution
of the Nigerian Financial Markets – 9
- The
functions of the Nigerian Capital Market – 9
- The
Importance of the Nigerian capital Market – 14
- The
Structure and Organization of Nigerian
Capital market – – – – – 18
- Operators in the Nigerian Capital Market – – 18
- The
Investment & Security Tribunal(IST)- – -30
- Stock
Broking Firms- – – – – – 30
- The
Issuing houses- – – – – – 31
- The
Registrar- – – – – – – 32
- Investment Advisers- – – – – – 32
- Portfolio Managers- – – – – – – 32
- Other Institutions in the Stock
Market – – 33
- Capital Market Regulation- – – – — 33
- Market Operations of NSE – – – – 39
- The Economic Effects of Investing in
the
Primary Market – – – – – 44
- Market Infrastructural Development
and
Innovations – – – – – – – 45
- Highlights of Recent Reforms in the
Capital Market 49
- The Concept of Industry and
Industrialization- 53
- Industrialization- – – – – – – 54
- Macroeconomic Issues- – – – – – 55
- Capital Market performance
Indicators- – 57
References- – – – – – – – 60
CHAPTER THREE: RESEARCH METHODOLOGY
- Research
Design- – – – – – – -62
- Nature
and Sources of Data- – – – – 62
- Population
of the Study /Size of Sample- – – 63
- Model
For Analysis- – – – – – – 64
- Method
of Data Analysis- – – – – – 65
- Limitations
of the study- – – – – – 66
References- – – – – – – – 67
CHAPTER FOUR: DATA PRESENTATION AND
ANALYSIS
- Data
Presentation- – – – – – – 68
- Test
of Hypotheses- – – – – – – 74
- Implications
of Results- – – – – – 82
References- – – – – – – – 84
CHAPTER FIVE: SUMMARY OF FINDINGS,
RECOMMENDATIONS AND CONCLUSION
- Summary
of findings- – – – – – 85
- Recommendations- – – – – – 86
- Conclusion – – – – – – 88
Bibliography.
LIST OF TABLES
Table
4.1.1: Indicators of Capital Market development
Table
4.1.2: Annual Market Capitalization on the Stock Exchange
Table 4.1.3a: Value of Transactions at the NSE by Class of Securities
Table 4.1.3b: Percentage of Industrial Loans to Total Transactions in
the NSE
Table 4.1.4: Gross Domestic
Product (GDP) at Current Basic Prices
Table 4.1.5: The Industrial Sector GDP Percentage and its Components
Table 4.1.6: The
Industrial Sector GDP and Its Components
Table 4.1.7: GDP of the Industrial Sector and
Industrial Loan from the Stock Exchange
Table 4.1.8: Nigeria’s Average Manufacturing Capacity Utilization
Rates and Industrial Loan from the Stock Exchange
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF THE SUDY
One of the cardinal economic
objectives of the developing countries is to achieve high economic growth that
will lead to rapid economic development and reduce poverty. Economic growth
means a sustained increase in per capita national output or Net national product
over a long period of time. This implies the ability of an economy to increase
the production of goods and services with the stock of capital and other
factors of production available within the economy. It is therefore assumed
that a high level of capital accumulation, with the right combination of other
factors of production will bring about higher out-put growth. Economic growth
has been theoretically and empirically established to be dependent on capital
accumulation or investment.
For
government to achieve its desired objective of high economic growth and rapid
development, it must pursue policies that will increase both the public and
private investments. Such investments lead to industrialization.
Industrialization is described as the methods used to increase productivity. It
is a system by which a society (a nation) gets its wealth through industries
and machinery. If a country industrializes, it develops a lot of industries,
and this will promote economic growth and development.
The
early stages of industrialization require systematic policy measures to steer
resources into the productive process. It is a known fact that the investments
that promote economic growth and development requires long term funding, far
longer than the duration which most savers are willing to commit their funds.
Hence, there is need for long term supply of fund for industrialization. This
vacuum is filled by the activities in the capital market.
Capital
market is a collection of financial institutions that are set up for granting
medium and long-term loans. It is a market for government securities; for
corporate bonds; for the mobilization and utilization of long-term funds for
development. It is the long-term end of the financial system. In this market, investors provide long term
funds in exchange for long-term financial assets offered by borrowers. The
market has both the new issues securities market (i.e. Primary Market) and
already existing securities market (the Secondary Market). Such securities
might be raised in an organized market such as the Stock Exchange. In this
sense, it may involve consortium underwriting, syndicated loans and project
financing. Thus, it is a mechanism whereby economic units that are desirous to
invest their surplus funds, interact directly or through financial
intermediaries with those who want to procure funds for their businesses.
sMore so, the capital market
synchronize the divergent preferences for
portfolio managers and financial institutions while providing avenues
for savers to invest when the need arises through the secondary market, without
affecting the operations of the firms which their savings had earlier financed.
In other words, through the secondary market, the capital market converts short
term investment to long term or perpetual investments are enlarged and economic
growth accelerated.
The
capital market is therefore very important to any economy because, it
encourages savings and real investment in any healthy economic environment.
Through the market, aggregate savings are channeled into real investment that
increases the capital stock and therefore the economic growth of the country.
1.2 STATEMENT OF PROBLEM
As already stated, the desire of
every nation is to achieve economic advancement and to improve the standard of
living of its citizenry. A major engine of economic growth of any nation is its
capital market. It impacts positively on the economy by providing financial
resources through its intermediation process, for the financing of long-term
projects. The projects could be promoted by governments or private sector
institutions. They are usually in such areas as infrastructure, agriculture,
solid minerals, manufacturing and other real sector areas. Hence, without an
efficient capital market the economy may be starved of the long term funds for
sustainable growth.
Having
been acquainted with the fact that the capital market of any nation is the
major engine of her economic growth and development; therefore, it is pertinent
to carry out a performance evaluation of such an important sector with regards
to its contribution towards the nation’s industrialization which enhances
economic growth.
1.3 OBJECTIVES OF THE STUDY
Since the capital market of every
economy is an important sector especially as it pertains to capital formation
and mobilization, it then means that any economic outcome which the growth in
capital market brings should have a lasting effect on economic indicators like
the Gross Domestic Product (GDP) and the National Income (NI).
Therefore,
the specific objectives of this study are:
- To
examine the effort of the capital market in boosting industrialization in
Nigeria.
- To
determine how the capital market is enhancing capital formation in Nigeria.
- To
ascertain the rate of growth in the development of the capital market.
- To
recommend what can be done to maintain or enhance industrialization through the
contribution of the capital market.
- RESEARCH
QUESTIONS
The following research questions have
been formulated to simplify the objectives of the study and to guide the
researcher in finding solutions to the problem this research study intends to
solve; the questions are:
- Has
the development of the Nigeria capital market aid the industrialization process
of the economy?
- How has the Nigerian capital market enhanced
capital formation in the economy?
- Is
there a speedy development of the Nigeria capital market?
- What
can be done in the capital market in order to enhance industrialization?
- RESEARCH
HYPOTHESES
The following hypotheses form the
framework for carrying out the study.
HYPOTHESE1
The
development of the Nigeria capital market has no significant positive impact on industrial development in
Nigeria.
HYPOTHESE II
The
capital market has not enhanced capital formation in the economy.
- THE
SIGNIFICANCE OF THE STUDY
The need for a study about the
performance evaluation of the Nigerian capital market on the industrialization
process of the nation from year 2002 to year 2008 is paramount. Within this
period, many financial and economic laws and programmes were made and
undertaken. These may have in one way or the other affected the performance or
activities in the capital market, hence the need for this research. Some of
these laws and programmes include:
- The
National Economic Empowerment and Development Strategy (NEEDS) undertaken from
2004.
- The
Pension Reform Act 2004.
- Conversion
from Dutch Auction system (DAS) to wholesale Dutch Auction system (WDAS) by the
central bank in February 2006.
- Restructuring
and privatizing state-owned enterprises.
In the high of the above discussion,
this research work will be beneficial to policy and law makers and
administrators in assessing the effect of the policies and laws they made in
the economy. It will also benefit operators in the capital market; and
investors as well.
In
the academia, this work will help to broaden the knowledge of students on
issues concerning the capital market and other macroeconomic issues.
More so, farmers are not left out. They will benefit from this work as it will serve as a guide to them (farmers) on the choice of crop to plant, i.e. crops with higher economic values. This they may know only if they are acquainted with crops that are traded in the commodity market, a segment of the capital market.
AN EVALUATION OF THE ROLE OF THE NIGERIAN CAPITAL MARKET ON THE INDUSTRIALISATION OF THE NIGERIAN ECONOMY: 2002 – 2008
