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PROJECT TOPIC: THE IMPACT OF STOCK EXCHANGE IN THE NIGERIA ECONOMIC GROWTH FROM 1980-2004

THE IMPACT OF STOCK EXCHANGE IN THE NIGERIA ECONOMIC GROWTH FROM 1980-2004

 

ABSTRACT

The purpose of this research was to find out the extent to which stock exchange has influenced the inflow of Gross Domestic Product (GDP). The method of multiple linear regression using the ordinary least square techniques was adopted in the study. The result of the study shows that, there exists a linear relationship between Gross Domestic Product (GDP) and stock exchange; that the overall performance of the independent variable and estimated model reveal that about 94.6% of the Gross Domestic Product is statistically insignificant but high at five percent as determined by the value of coefficient of determination R2, that the impact of the constant in the model is statistically significant, that there is perfect positive auto correlation in the model.

Also certain recommendation was put forward such as government should minimize its controlling influence on the stock exchange as to encourage a free market determined exchange in the market. That government should introduce some tax incentives in addition to enacting legislation to place quoted companies at an advantage over inquoted one. That government should assist the Nigeria stock exchange in the sensitization campaign to enlighten the general public on the benefit of investment through the stock exchange. We believe that the efficacy of the Nigerian stock exchange will be enhanced if suggestions are implemented.

 

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

 The stock exchange plays a crucial role in the mobilization and channelization of medium to long-term capital within an economy. How well, it does this depends to a large extent on it’s efficient functioning. Considering the fact that sustained growth and development entails long term commitment of capital little wonder then that an efficient stock exchange is considered the “hub” around which successful economics revolves and the foundation on which they are built

A financial system comprises the entire categories of institutions and institutional arrangement established to serve the needs of modern economics. Put more succinctly, the financial system provides the economic system with the locative conduit through which scattered saving of the masses of society are first aggregated and then disaggregated among economic units (Olashore 1985, Ezirim, 1985) the financial system, therefore consist of financial institutions financial instrument rules, convention and norms that facilitate and regulate the flow of fund through the macro-economy. The system itself as controlled by the government through the agency of the central bank of Nigeria which supervises the activities of financial intermediaries and monitors adherence to the monetary and fiscal policies.

The financial market plays a very important role in the provision of investible resources that enhance the growth and development of the economy the financial market is classified into two main categories, the money market and the capital market. The money market deals on financial instruments whose maturities are about two years or less e.g Treasury obligations, bill and certificates, current maturing long-term obligations etc (Ezirim 1985). Generally, the money market deal in short and medium term financial instrument that are readily convertible into cash and whose maturity ranges between a few days and two years. This market primarily exist as a means of liquidity adjustment and includes the treasury bills, treasury certificate, commercial papers, bankers acceptances, unit fund, money at call.

The capital market on the other hand deals on instrument with maturities longer than one year Example: bond debentures and equity stock. The importance of the stock market cannot be under estimated. It is the fundamental instrument of stock formation in any economy. Investment cannot take place in a vacuum; stock market is required. A well developed stock market ensures the availability of capital funds for investment and development project. Usually they required long gestations periods which the fund money market cannot sustain. This means that the absence of a vable stock market in any economy would result in shortage of long term funds that and would hamper investment and hence stunt economic growth. In this study, we shall limit our scope to analyzing the impact of the national sub-sector using the activities of the Nigeria capital market as our anchor point.

THE IMPACT OF STOCK EXCHANGE IN THE NIGERIA ECONOMIC GROWTH FROM 1980-2004

 

STATEMENT OF THE PROBLEM

As a way of improving the activities of stock market, there have been series of developmental and corrective measures being introduced by the government, which include following; deregulation of the market, introduction of the second-tier market etc. with all these innovations, the stock market has grown significantly interm of market capitalization volume of long debt stock sold, volume of transactions and the number of operators eg stock brokers). It is against this background that in the course of this study, some problems associated with the Nigeria stock exchange have been identified; these are

  1. The constraining regulatory environment of the securities and exchange commission affects the volume and value securities offered.
  2. The securities laws and the presence of unregulated informed market such as (meeting, issue and union with co-existence of the modern financial institutions makes it difficult to known the extent the organized stock market has created investments.
  3. Also, the paucity of market functionaries and the low interest rate structure leads to mismanagement in the market.

The educational disparity among the populace makes it almost impossible for some people to understand investment possibilities.

THE IMPACT OF STOCK EXCHANGE IN THE NIGERIA ECONOMIC GROWTH FROM 1980-2004

 

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