ABSTRACT
This research work evaluates the effectiveness of the
capital market in the mobilization and allocation of funds to productive
sectors of the economy. Reviewed the role of the capital market, economic
stability, sustainable growth and development of the Nigerian economy. The
researcher identified; the objectives, the scope and limitations of the
research work. Hypothesis statements to test the validity of the phenomena
under investigation were stated and analyzed. A review of various literatures
relating to the Capital Market was also undertaken. Data relating to capital
market were presented and analyzed using various statistical analysis methods
such as simple percentage, bar chart, correlation and regression analysis.
Based on the outcome of the analysis, it is concluded that the capital market
has contributed effectively in the mobilization and allocation of funds to the
productive sector of the Nigerian economy. The researcher recommends thus; that
there exist an opportunity to attract new firms into the Capital Market, this
will further burst the liquidity and capitalization level of the market. The
recommendation also listed measures to be put in place to achieve a vibrant
capital market.
CHAPTER ONE
1.0 INTRODUCTION
The capital market is central to the economic stability,
sustainable growth and development of any economy. Sustainable growth and
development in an economy has a direct bearing to the viability of the
productive sector. To achieve this, it is essential that the capital market
through the use of financial instruments mobilizes and allocates funds to meet
the funding needs of the productive sector.
The capital market trading institution in Nigeria is the
Nigerian Stock Exchange (NSE). Thus the NSE should develop a variety of
financial instruments capable of providing diverse investments outlets and
opportunities for both the investors and borrowers in the market.
In the recent past, the Nigerian economy has been saddled
with the challenges of a declining productive sector following the inability of
the sector to get adequate funds to meet its needs from both the money and
capital market. On the part of the capital market, the challenge has been lack
of a variety of investment tools, low savings capacity of investors for the market as well as the market
capitalization which is stewed above 50% in favour of services sector of the
economy that is, banks, insurance companies etc.
Following the above assertion, this study aims at investigating
the impact of the capital market on the productive sector of the economy: A
study of the Nigerian Stock Exchange and Selected Quoted Stocks from 2000 to
2009. The instruments of study will consist of Equities, Debentures, Preference
Shares, and development stocks.
1.1 OBJECTIVES OF
THE STUDY
The purpose of this study is to evaluate the effectiveness of
the capital market in the mobilization and allocation of funds to the
productive sector of the economy; A study of the Nigerian Stock Exchange and
Selected Quoted Stocks (2000 to 2009).
The process involves a comprehensive study of the capital
market in Nigeria from 2000 to 2009. This includes the investigation of the
laws, regulatory mechanism and instruments of the market and their impact on
development of the productive sectors of the economy. The specific objectives
are as follows:
1. To find out the extent the capital
market has contributed to the development of the productive sector of the
Nigerian economy.
2. To find out the various financial instruments employed by the
capital market for selected companies in the productive sectors of the economy
and how these instruments have contributed to their growth and that of the
economy.
3. To examine the dept of equity financial instruments in the
market and their contribution to economic development.
4. To find out if their exist deficiencies in the legal
regulatory framework of the Nigerian capital market.
To find out the depth of equity financial instruments,
especially in the productive sector firms quoted on the Nigerian Stock Exchange,
and their contribution to economic development.
5. To find if any relationship exists between the prices of
equity as well as the value and market capitalization of the Stock Exchange in
relation to GDP. (i.e. the GDP is the index of productivity in the economy).
6. To analyst the growth of each tool
(that is, Equity and Fixed interest debt instrument) in the Nigerian Stock
Exchange in relation to growth of the companies and the economy.
1.2 STATEMENT OF
THE PROBLEM
The Nigerian capital market which before now was described as
one of the fastest growing stock market in Africa witnessed serious crises and
loss of value following price crashes especially in the banking sector equities
that constituted more than 50% of the market capitalization.
As a result of this, the market capitalization which in 2008 was about N12.5 trillion fail and is presently at N5.5 Billion (source: Stock Exchange weekly activities summary 19/2/2010).
The confidence of investing public dropped, especially, as it relates to investing in equities financial instruments.
Thus, there exists the need to create a variety of financial
instruments that can assist the market provide:
i. Investment windows for the market participants such as;
a. Equities investment tools
b. Fixed debt investment tool (corporate bodies)
d. State Government Development Stock
e. Local Government/Municipal Stock
f. Mortgage Based Financial Tools
g. Derivative Financial Tools
ii. The availability of these financial instruments will help
deepen the market and attract additional investment funds from both local and
foreign private investors.
iii. Create the required choice for firms who want to raise money
from the market.
iv. Create a viable productive sector of the economy.
This research therefore is concerned with the slow growth in
the productive sector of the economy and how the capital market can be used to
facilitate growth, especially, in the productive sectors of Brewing, Food and
Beverages as well as construction sectors.
The problem of the research is to find how best to analyze,
examine and proffer solution to the factors that affect the capital market
especially the market instability, low productive sector activities as well as
declining market capitalization. These factors of market instability, low
productive sector activities and declining market capitalization impact
sometimes positively or negatively on economic development of Nigeria.
Also, to investigate the impact of inadequate operational
tool in the Nigerian Capital Market, inadequate savings for investment, lack of
market transparency, political and economic instability as well as
infrastructure deficiency is to be undertaken.
1.3 STATEMENT OF
HYPOTHESIS
A statement of hypothesis is a tentative statement about
phenomena whose validity is usually unknown. It is best described as a
statement of probability; such a statement so far is not supported by relevant
information or data.
Statement of hypothesis is often stated to highlight the
perceived relationship between a dependent and our independent variable.
There are various types of hypothesis for the suppose of this
research, we will consider the Null Hypothesis and the Alternative Hypothesis
Null Hypothesis, this is the reverse of the research
hypothesis. It is normally stated in the negative form.
Alternative Hypothesis, this is the
working hypothesis. It is usually derived from researcher’s theory about some
observed phenomena on the subject under research.
HYPOTHESIS
NULL HYPOTHESIS (HO): Capital Market operation does not
enhance the productive sector development in Nigeria ALTERNATE HYPOTHESIS (HI):
Capital Market operation enhance the productive sector development in Nigeria
Hypothesis 2
Ho: (Null
Hypothesis): The growth in the value and volume of equity financial instrument
for productive firms quoted on the Stock Exchange does not contribute to
economic development.
Hi: (Alternative
Hypothesis): The growth in the value and volume of equity financial instrument
for productive firms quoted on the Stock Exchange contributes to economic
development.
Ho: (Null
Hypothesis): The growth in the value and traded volume of securities quoted on
the Nigerian Stock Exchange does not contribute to economic development.
Hi: (Alternative
Hypothesis): The growth in the value and traded volume of securities quoted on
the Nigerian Stock Exchange contributes to economic development
1.4 SCOPE AND
LIMITATION OF THE STUDY
This study is focused on the analysis of the Nigerian capital
market and real sector development in Nigeria using selected financial
instruments by some quoted companies in the Nigerian Stock Exchange. However,
owing to the limitation of time, resources especially finance, data from the
institutions, the analysis will be limited to the Nigerian Stock Exchange and
three selected companies quoted in the productive sector of the Stock Exchange
such as brewing, construction and food and beverage.
The period to be evaluated by this study is a period of ten
years 2000 to 2008.
The capital market is a major source of long term savings
mobilization in any economy. For any economy to grow, the real sector of the economy
must be actively engaged in production of goods and services. Given this view,
therefore, a functional real sector in any economy is a sine-que-non to
economic growth and development. Therefore, a study of this nature is very
essential to all stakeholders in the Nigerian economy such as Manufacturers
Association of Nigeria, Industrialist, Bankers, Stockbrokers, Financial Sector
Regulators, the Political Managers, Investors, consumers and the entire
Nigerian Society.
Also, the findings from this study will extend the frontier
of existing knowledge, literature and serve as a stepping stone for further
research. It will provide input for investment, policy making and decision.
1.6 RESEARCH
METHODOLOGY
In conducting a research work, the student is involving in
designing the research. This involves the employment of survey and descriptive
designs.
The researcher also determines the
sample population and sample size of the study. The population being the
Nigerian capital market and selected instruments traded on the Stock Exchange
for firms in the productive sectors of the economy.
The process of sourcing, selecting and obtaining valid and
reliable data as well as method to be employed in the analysis of the data is
thus carried out by the researcher.
Given the nature of this topic, the researcher will rely
mainly on secondary data.
The sources of the data will include:
i. The Nigerian Stock Exchange Daily Trading List
ii. The Nigerian Stock Exchange Quarterly and Annual
Report/Review
Security and Exchange Commission (SEC) Quarterly Reports
iii. Security and Exchange Commission Annual Report and Account
iv. Financial Statement of quoted companies in the manufacturing
and Stock Exchange
Central Bank of Nigeria (CBN) Statistical Bulletins
The following statistical tools will be applied in the test
to be carried out in this research work:
a. Simple Regression Analysis
b. Correction Coefficients
c. Coefficient of determination
d. Student’s t-test
e. Bare chart
f. Simple percentage analysis
At the end of the analysis, the degree of the association of
the dependent variable with each of the independent variables will determine
their position in the valuation process.
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Item Type: Project Material | Size: 114 pages | Chapters: 1-5
Format: MS Word | Delivery: Within 30Mins.
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