CHARTER ONE
1.0 INTRODUCTION
1.1 BACK GROUND OF THE STUDY
This
study is a modest attempt at a lucid explication of the perceived impact of
inflation on the Nigerian capital market. Inflation has been define by many
economics. According to Ile (1990:160),he said that inflation is a contentious
upward movement in the general price level. It can also be defined as an intermittent
rise in the general level of prices.
Inflation
may involve a steady but moderate annual rise in the general price level up to
about 5%. Here, the volume of purchasing power is persistently running out of
the output of goods and services so that there is a continuous tendency for
price commodities and factors of production fail to increase with the demand
for them. This types of inflation can be persistent rise in general price
level. It is a situation of too much money chasing too few goods.
At
period, the value of money, because of excessive creation of money results in
high increase in price. This type of inflation is described as galloping
inflation, money losses its function as a store of value and its medium of
exchange function may be affected as people are unwilling to accept it.
According
to OBASIKENE (2003) she noted that capital market is a market for buying and
selling of long term funds. The Nigeria
capital market is of two categories namely;
–
Primary market
–
Secondary market
PRIMARY MARKET:
this is the market for the issuance of new securities (securities are document/
papers that are given to show that money was borrowed) the securities sold in
the market are being issued into the market for the first time.
SECONDARY MARKET: Is
a market for trading of old securities. Old securities are securities that are
already in existence.
- STATEMENT OF THE PROBLEM
To avoid the ugly situation of inflationary trend
in Nigeria,
the following problems are stated in the study to find solution, which will
help reduce the impact of inflation in the Nigerian capital market.
The management of the Nigeria stock
exchange has done nothing in checking inflationary trend in the Nigerian capital
market.
The government has not done anything to monitor other sector of the economy whose activities are likely to spring up inflation. Also government failed to extend the bank loan to important sector of economy.
Thus, the problem of this study is to
investigate the important of inflation on the Nigerian capital market.
- OBJECTIVES OF THE STUDY
This
study is designed towards achieving the following major objectives:
- To evaluate the way inflation affects the
shares of quoted companies in Nigerian Stock Exchange.
- To determine the effect of inflation on the
ability of the economy to purchase securities in the Nigerian capital market.
- To ascertain whether the inflationary trends
affects the Nigerian Capital Market Operation adversely.
- To examine the level of inflation in Nigeria.
- To examine the impact of inflation on the
price of securities in the Nigerian Capital market.
- RESEARCH QUESTIONS
The
research questions for work will be based on the following:
- To what extent does inflation affect the
shares of quoted companies in the Nigerian Stock Exchange?
- To what extent does inflation effect the
purchasing of securities in the Nigerian capital market?
- How far does an inflationary trend in Nigeria affect
the Nigerian Capital market?
- What impact does inflation have on the price
of securities?
1.5 FORMULATION
OF HYPOTHESIS
The
following have been put forward tentatively for the purpose of developing
evidence for or against the preposition in question.
i. Ho: Nigerian Stock Exchange staff perception is that inflation does not affect the shares of quoted companies
ii. Ho: Nigerian Stock Exchange staff perception is that inflation has no affect on the pricing of securities on the Nigerian Capital Market.
iii Ho: Nigerian Stock Exchange staff perception is that inflationary trends in Nigeria does not affect the Nigerian Capital Market.
iv. Ho: Nigerian Stock Exchange staff perception is that the inflationary trend in Nigeria does affect the Nigerian capital market operations.
1.6 SIGNIFICANCE OF THE STUDY
The beneficiaries of the
research work are as follows:
- This study is significant to all the students
of banking and finance to enable them know more about the impact of inflation
on the Nigerian capital market. Also to students of other departments who may
be interested in carrying out further research study on capital market.
- Investor of long-term capital:- lender and
borrowers of long term basis will drive assistance from this work, as it will
enable them to do their homework very well before investing.
- Management of Nigerian stock exchange in
better policy formation.
1.7 SCOPE OF THE STUDY
This research area and dimension of coverage are based on
the effect of inflation on Nigerian capital market operations. The work extends
to the inflationary impact on the various aims of the Nigerian capital market.
The work also covers the existing forces that influence the activities within
the capital market.
We have Nigerian stock exchange all over
the country but for the sake of this study. Nigerian Stock Exchange Onitsha was
covered.
1.8 LIMITATIONS OF THE STUDY
The researcher is also affected by the usual constraints
and problems prominent in similar researchers in Nigeria.
These constraints were
summarized below;
FINANCE: This created a lot of problems to researcher in cause of carrying out proper investigation of the research, but this was not enough because of other uses in which it is been put to.
TIME CONSTRAINTS: The time available for the research work was very limited with other assignment and preparation for examination has caused a barrier to the research findings.
DEARTH OF STATISTICAL DATA INFORMATION: As a result of lack of documental data, the research work appears to be some how written for easy understanding.
THE PERCEIVED IMPACT OF INFLATION ON THE NIGERIAN CAPITAL MARKET: A CASE STUDY OF THE NIGERIAN STOCK EXCHANGE, ONITSHA, ANAMBRA STATE
