ABSTRACT
There has been a growing interest in the study of economic growth and development since the middle of the last century. The role of stock exchange in the Nigerian economic development cannot be over-emphasised. The capital markets is a complexity of institutions and mechanism through which intermediate funds and longer term funds are pooled and made available to businesses, individuals and government.
This study has been designed to research on the impact of stock exchange in Nigeria economic development.
Secondary data were soured and the Ordinary Least Squares (OLS) Estimation was used for the empirical analysis. The results revealed that a significant relationship exist between the Nigerian stock exchange and economic development. The results also show that the variables used for the empirical analysis are important economic indicators as they were having a high predictory power of the estimated model.
Hence, there is a need for government to empower the regulatory authorities such as the Securities and Exchange Commission (SEC) to enable them formulate the appraite policies in order to boost the Nigerian stock market and to attract foreign investors into the market.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The world stock markets are booming and stock markets in developing countries account for a disproportionately large share of this boom. Over the past 10 (ten) years, the total value of stocks listed in the entire world stocks market rose from $4.7 trillion to $15.2 trillion (us dollars).
Following the huge rise in various countries capitalisation leading to such increment in world’s capitalisation, the development of stock market in recent past has received increased attention among governments, development finance institutions and also individuals. Countries at different levels of development are promoting the development of stock market with the expectation that these efforts will pay-off in terms of faster economic growth and development.
In Nigeria, the federal government restructured the economy in 1977 through the promulgation of the indigenisation decree with the objective of increasing Nigeria citizen’s holdings of the existing multi-national companies. Also in the late 1980s and early 1990s, the government through the policy of privatisation and liberalisation decided to dispose off her share holdings in some companies through public offer in the stock exchange market.
The guest for faster and sustainable economic growth and development formed the decision of the 1991 summit of the organisation of Africa unity (OAU) in Abuja that each country should set up a stock market as a way of promoting a balanced financial system.
Creation of policies and modifications of the stock market seem to affirm and attribute to its immerse importance and contributions to the country’s economic growth.
A thorough investigation of the stock market in the Nigerian economy is therefore important to unveil its tremendous impact not only in the creation of wealth for shareholders or as a means of acquiring capital for corporations, but as a way of fostering the country’s economic growth and development generally.
1.2 STATEMENT OF THE PROBLEM
The Nigerian stock exchange (NSE) since its establishment in 1960 has been playing a pivotal role in the development of the Nigeria economy. This it does with the provision of long term loans/funds for development projects and industrial development.
This project will try to assess the role of the activities of the Nigeria stock exchange on the Nigeria economy.
It is needless to state that no singular article would be enough to fully assess the contributions of the stock exchange market to economic development.
This project will also assess the contributions of the stock exchange in economic development in terms of;
- The performance of the Nigerian capital market in terms of new issues, market capitalisation, stock index etc.
- The role of Nigerian capital market in economic development.
- The growth of the stock exchange market in terms of securities listed in the stock exchange.
- Its contributions to socio-economic development.
- OBJECTIVES OF THE STUDY
The objective of the study is to examine the Nigerian stock exchange with the aim of ;
- Finding if the impact of the stock market on the country’s overall growth and development is significant.
- Finding out the types of investment opportunities available in the stock market.
- STATEMENT OF THE HYPOTHESIS
A research hypothesis is a tentative statement of the relationship between two or more variables. However, for the purpose of this research work, the following hypothesis is stated for our empirical validity;
Null Hypothesis (Ho): The Nigerian stock exchange (NSE) has not impacted on the Nigerian economic development.
Alternative Hypothesis (Hi): The Nigerian stock exchange (NSE) has impacted on the Nigerian economic development.
1.5 THE SIGNIFICANCE OF THE STUDY
The relevance of the study is to contribute to other related works that the stock exchange market serves as veritable tools in the growth and development of the economy of Nigeria and other developing countries.
It will also serve as a way to educate and enlighten Nigerians on the importance of investing in the stock market.
1.6 SCOPE/LIMITATIONS OF THE STUDY
The research is confined to Nigeria although it serves as a reference point to developing countries in the world.
Nigeria is therefore focused on, as a case study because it is a good example of a developing economy which contributes immensely to increased world stock capitalisation.
Fully answering the questions in this study is will beyond the scope of any single article. Constraints such as inability to obtain current data, access to relevant materials, and finance among others are some of the limitations encountered.
Despite these, it is believed that with the aid of this study and of other related written articles, the importance of the stock exchange as an engine of economic development would be further exposed.
