INTERMEDIATE AND LONG TERM FINANCING IN NIGERIA (A CASE STUDY OF CAPITAL MARKET)

CHAPTER ONE

INTRODUCTION

A country must invest to build up productive capacity for growth to occur. It is this capacity that determines the level of output of goods and services in the economy. If investment which represents the net increase in an economy’s’ capital stock, leads to growth then there is relationship between capital accumulation and economic growth when sustain growth has occurred. It is expected that over time with appropriate policies that allow for more equitable distribution of income among a progressive larger percentage of the population, economic development would follow.

Hence, the fact that capital is needed for economic growth is not disputable.

1.1     BACKGROUND OF THE STUDY

In the early 1980’s the analyst frame work on which standard structural adjustment programmes of the world bank and IMF was drawn, placed tremendous resources in self sustained growth process. So every country needs capital to grow. The possession of relatively small stocks of various kinds of capital is a characteristic of under developed were as the condition of being developed means having accumulated established, efficient social and economic mechanism for maintaining and increasing large stocks of capital per head in various forms.

Therefore for under developed economy, a country’s capital stock will only contribute to the economic growth. If its investments are productive in this respect, the domestic economy must provide the right policy environment incentives and stability that can sustain and encourage the required flow of savings from the surplus spending units and then into long-term investment that will enhance productive capacity. The capital market contributes to the mobilization of savings by providing a variety of market instrument for the holding of financial assets in the economy. While improving opportunities for business to obtain equities and long term loans, which encourage long term productive investments.

Savings and investments are carried out by two distinct groups of people, thus the need for some form of medication, various types of financial institution the stock exchange, issuing houses, stock brokers, share registrars share distribution agents (commercial banks) institutions investors (merchant banks) Nigeria enterprises promotion board, (NEPB) Nigeria security and exchange