THE EFFECTIVE OF ECONOMIC MELTDOWN IN NIGERIA CAPITAL MARKET AND REMEDIES (A STUDY OF NIGERIAN STOCK EXCHANGE MARKET UYO, AKWA IBOM STATE)
TABLE OF CONTENTS
Cover page
Title page
Declaration – – – – – – – i
Certification – – – – – – – – ii
Dedication – – – – – – – – iii
Acknowledgement – – – – – – – iv
Abstract – – – – – – – – – v
Table of content – – – – – – – vi
CHAPTER ONE:
1.1 Background of the study – – – – – 1
1.2 Statement of the Problem – – – – – 4
1.3 Objectives of the Study – – – – – 5
1.4 Research Questions – – – – – – 6
1.5 Significance of the study – – – – – 6
1.6 Scope/limitation of the study – — – – 7
1.7 Definition of Terms and Acronyms. – – – 7
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.0 Introduction – – – – – – – 10
2.1 Overview of the Nigerian Capital Market- – – 11
2.3 Objectives of Nigerian stock – – – 20
2.4 Reasons for the Establishment of the Nigerian Capital Market – – – – – – – 21
2.5 Operators Instrument in the capital Market – 22
2.6 Method of Accessing the securities in the capital Market – – – – – – – – – – 22
2.7 Benefits of the Capital Market to Investors- – 24
2.8 Benefits of the Capital Market to Companies – 24
2.9 The economic meltdown cause and the Nigerian capital Market – – – – – 25
2.10 The economic meltdown consequences on the Nigerian capital market – – – – – – 30
2.11 The possible impact of the economic meltdown on Nigerian capital market – – – 33
2.12 Measures adopted to curb economic meltdown in Nigeria Capital Market – – – – – – 34
2.13 Significance and Impact of a stock exchange in a developing economy – – – – – 36
2.14 Recent reforms on the Nigeria stock Exchange – 37
2.15 Overview of financial System- – – – – 37
CHAPTER THREE: RESEARCH DESIGN AND PROCEDURES
3.1 Introduction – – – – – – – 41
3.2 Area of the Study – – – – – – 41
3.3 Population of the Study – – – – – 41
3.4 Sample Determination and Sampling Techniques 41
3.5 Sources of Data – – – – – – 42
3.6 Instrument/Method of Data Collection – – 42
3.7 Data Analysis Method. – – – – – 40
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1 Introduction – – – – – – – 43
4.2 Data Analysis and Result – – – – – 44
4.3 Discussion of Findings – – – – – 46
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary – – – – – – – – 48
5.2 Conclusion – – – – – – – 49
5.3 Recommendations – – – – – – 49
REFERENCES
APPENDICES
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The economic meltdown can be seen as a crisis situation whereby the resources that are supposed to be available for usage are either very scarce or not available, leading to the inability of leaders of different countries of the world to meet targets, plans and programme. The economic meltdown represents a worldwide recession that is slowing down economic regions of the world. The reverberating effects of the meltdown have been felt in the banking sector, capital market and other vital sectors as exemplified by the collapse in investment.
The meltdown which has its root in a banking practice called sub-prime mortgage leading in the United States, packed during the summer and autumn of 2008 with increasing panics from a tightening credit crunch in the united state and United Kingdom with extreme stresses and spreading global fears of monetary near collapse of the economics of many nations. The mounting panics and fears that continue to cross the global with new relation of crashing stock exchange, collapsing investment banks, falling commercial banks, and stagnated credit etc. is forcing everyone to starkly realize that with the combined losses that could amount to $100 trillion before it is hand over, the world would have suddenly and radically changed.
The Nigerian stock exchange (NSE) started as the Lagos stock exchange Act, 1961. This followed the favourable report of the Barback committee (set up in May 1958) to advice on “ways and means of fastening a share market in Nigeria”. The Lagos stock exchange was incorporated on 15th September, 1990 and commenced business on 5th June, 1961.
In 1998, the federal government approved the information of a second stock exchange known as the Abuja stock exchange, which is independent of the Nigeria stock exchange. It has commenced operations at Abuja.
In spite of, 26th August 2008 major stakeholder’s policy decisions, the all share index has most often continued to drop. The Nigeria stock exchanges all share index (NSE-ASI) which is the Nigerians stock market index provides a composite picture of financial health of the 300 equalities listed Sylvester (2009). The NSE-ASI state in 1984 with an index value of 100 and reached its highest ever value of N66,371 on March 5, 2008 with a market capitalization of N12.640 trillion but since then has shown an unprecedented noted decline. The NSE-ASI as 69 percent drop from the higher point March 5, 2008. The market continuous to show a secular bearish pattern and at present threatens to violate the 10.000 support level by the end of the year.
Several reason have been advanced for this “crash” but most of the fingers are pointing at the Nigeria banking industry has exposed itself to server hazard considering its action in view of post consolidation of 2005, rather than embarking on stronger regulations, corporate government, transparency in financial reporting, strengthen human capital and risk management. It went back into the capital market a second time to raise more capital, this market visitation of geometrically increased the outstanding shares of the banks. It is estimated that about US $15billion of foreign investment has been withdrawn from the capital market over the past two years, as foreign investors withdraw their countries. These has resulted in low capitalization of the market hence, the drop in the index. The current crash of the Nigerian capital market has been unprecedented in its historical evolution since 1960 to date.
1.2 Statement of the Problem
Capital market is machinery for creation of wealth and catalyst needed to sustain the growth and development of any economy. Like most capital markets across the world, the Nigeria capital market went through a rough period although the last quarter 2008, recording huge losses by the close of the year. Contrary to the initial overstated confidence in Nigerian capital market was immune to the economic crisis, the nation in today among are major casualties oil prices and naira value are falling, shareholders and investors no longer invest in the capital market which government revenue is dwindling and some development programs like 7-points agenda of the federal government have seen abandoned.
1.3 Objectives of the study
The objectives of this research project are enumerated below:
- To trace the impacts of the economic meltdown on the Nigerian capital market.
- To know the benefits of the capital market to investors and companies alike.
- To identify causes and consequences of economic meltdown on the Nigerian capital market.
- To know the measure adopted to curb the economic meltdown in the Nigeria capital market.
- To make suitable recommendation on the prevention of economic meltdown on the Nigerian capital market.
- Does economic meltdown have any impacts on the Nigerian capital market?
- Are investors able to reap from their investment in the capital market because of economic meltdown?
- What are the causes and consequences of economic meltdown on the Nigeria capital market?
- What are the measures adopted to curl the economic meltdown on then Nigeria capital market?
1.5 Significance of the study
This research project will provide way for government of the various countries in their effort to tackle the economic meltdown in the capital market. It will further serve as a useful guide to other researchers, especially students who may be interested in further research undertaking in this regards. Moreover, it will provide a critical information on the extent at which the crisis has affected the capital market, and the concerted effort required from the government, the exchange commission (SEC) and the central bank of Nigeria (CBN) and other institutions to work around the clock forward for better ways and positive policy responses for addressing the crisis as well as alleviating its incidence.
Finally, this project work will serve as the fulfillment of the basic requirement for the award of national diploma in accountancy.
1.6 Scope and limitation of the study
Although, the economic meltdown is global, and it affect almost all the sectors of the economy, the emphasis of this project is on the Nigeria capital market only. Furthermore, financial inadequacy, time constraint and limited sources of data have also contributed in the limitation of the study.
- Definition of terms and Acronyms
CAPITAL MARKET: According to Essiet (2006) who define capital market as the market from which large companies and public enterprises attract long term investment funds through a network of financial institutions and stockbrokers incensed to perform capital market functions.
ECONOMIC MELTDOWN: Economic meltdown is a global crisis whereby the resources that are supposed to be available for usage are either very scarce or not available for investors to meet there target, plans and programme.
STOCK EXCHANGE: Stock exchange is a place whereby individuals, companies and government agencies buy and sell shares, stocks government bonds, debentures and other approved securities.
MARKET CAPITALIZATION: Is a measurement of corporate or economic size equal to the share price times of the number of share outstanding.
STOCK MARKET: Is a public market for the trading of company stock and derivatives at an agreed price.
STOCK AND SHARES: According to Angaiede (2005) stocks and shares are securities bought by an individual or companies which is an evidence of contributing par or fractional of the capital used to run an existing company.
SHAREHOLDERS: Is a person or owner of shares in a company.
INVESTOR: Is a person or an organization that invest money in the running of economic or business.
GROSS DOMESTIC PRODUCT: Refers to the total consumer investment and government spending plus the value exports minus the value of imports.
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