CAPITAL MARKET, ITS NATURE AND SIGNIFICANCE

CHAPTER ONE

1.1         INTRODUCTION

A capital market is a complex institution comprising of regulators, facilitators, issuers and investors.  It is the mechanism through which long term funds for households, firms and government are polled and made available to various sectors of the economy, including transfer of instrument already outstanding.  The capital market on the other hand, deals with long term financial claims and obligations.  It provides the necessary facilities for users and supplier of capital (Longterm) funds to interact for their mutual benefit.  Hence most financial activities which are necessary in the investment process are consummated in that market.  Capital market instruments have long-term maturity.  Some like equity stock have indefinite maturity dates.  In general, all financial transactions which involve maturity periods of over three years could be presumed to belong to the capital market it also has no confined place for its operation however, parts of the market are concentrated in certain well-known centers.  Participants in the market are businessmen, government at all levels, financial intermediaries and private investors.  In this market buyers are more specific about their requirements.

1.2       STATEMENT OF PROBLEM

            Capital market is a market that deals with long term funds and procedure for financing long-term investments.  it is also a market where by small business cannot benefit because of its high interest rate.

            I want to investigate on some of the problems that hinders the promotion of capital market in Nigeria, also the corrective measure which could be used in solving these problems.

Some of the problems the researcher intends to research are:

a.            Dearth in securities

b.            Lack of adequate publicity

c.            Retention attitude

d.            Low savings

e.            Lack of interest in securities

Some of the corrective measures that could be adapted to resolve the problem are:

a.            Education on the important of buying

b.            Government helping to increase the standard of living in Nigeria.

c.            High interest rate should be implemented

d.            Establishment of more quoted companies that will participate is selling of securities

1.3 OBJECTIVES OF THE STUDY

                  The main aim of the study is to find out how capital market institutions can detect and control some of these problems in issuing of securities to the public for the improvement of capital market in Nigeria.

      Some objective of this study are:

1.    To draw a clear picture of the nature capital market, its significance to economic growth and development of the economics.

2.    To know the causes of these problems facing them.

3.    To identify the implication of these problems in our economic.

4.    To profer the possible solution to the problem.

1.4      RESEARCH QUESTIONS

1. What is the nature capital market, its significance to economic growth and development of the economics?

2.    What are the causes of these problems facing them?

3.    What is the implication of these problems in our economic?

4.    Is there a possible solution to the problem?

1.5. RESEARCH HYPOTHESIS

Ho: The NSE has not been performing any significant role in the Nigeria economic development.

Hi: The NSE has been performing a significant role in the Nigeria economic development.

1.6. SIGNIFICANCE OF THE STUDY:

            The study will be immensely beneficiary to the institution under study.  The findings of the research work together with its conclusion and recommendation will be of importance in the regard to future researchers.  It is also hoped that it will serve as a basis for further academic adventures.

            The relief of these problems should improve capital market in our country.

These will also increase move surplus funds in economic development.

These will attract foreign capital inflows in Nigeria.

1.7. SCOPE OF THE STUDY

The study is restricted to the nature and significance of the capital market using the Nigeria stock exchange as a case study.

1.8. LIMITATION OF THE STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9. DEFINITION OF TERMS

Economic Growth: Is the increase in the goods and services produced by an economy, typically a nation, over a long period of time. It is measured as percentage increase in real gross domestic product (GDP) which is gross domestic product (GDP) adjusted for inflation. GDP is the market value of all final goods and services produced in an economy or nation.

Capital Market: Is a market in which long term capital is raised by industry and commerce, the government and local authorities. Simply, it is that part of the financial market that provides facilities for the transfer of medium and long-term funds to various economic units.

Nigerian Stock Exchange: Are a market where securities (bonds, stocks and shares of varying types) are traded openly and where one can purchase or sell any of such securities with relative ease.

Financial Institutions: These are institutions that use their funds chiefly to purchase financial assets, deposits, bonds, loans and so on.