ROLE OF CAPITAL MARKET IN ECONOMIC DEVELOPMENT

CHAPTER ONE

1.0 INTRODUCTION
1.1 GENERAL OVERVIEW OF THE STUDY
The Nigerian capital market has always played a significant role in the economic growth and development of the nation. In times of economic boom, it assisted in the provision of finance for expansion, and establishment of productive facilities.
The term capital market is a complex institution and mechanism whereby medium and long term funds are pooled together and made available to large business, government and individuals and stock brokers licensed to perform capital market function. It is a market whereby existing instrument already outstanding are transferred. In current period of recession, it has been providing finance for maintaining existing facilities, diversification & acquisitions. Apart from its fund mobilization role, the capital market bring together those with surplus or idle funds who wishes to invest “ultimate lender” and those who wish to borrow “ultimate borrowers” for a medium or long term basis.
The capital market has grown so much that its importance cannot be over emphasized. Due to its varied roles, this research work will attempt to briefly give an overview and history of Nigerian capital market and discuss the role of Nigerian capital market in economic development which is the concern of this study.

1.2 STATEMENT OF THE PROBLEM
The Nigeria economic sector inspite of the great potentials has failed to achieve the great aim of converting Nigeria into a developed economy.
Second tier securities market was established to remove obstacles which militate against indigenous companies seeking quotation and to provide wider and cheaper long term, source of funding for small and medium sized indigenous companies.
Inspite of this most of our indigenous companies still shy away from the stock market. other problems include the requirement of stock exchange before quotation and the way the stock exchange has been developed over years and also the ignorance about the activities of the capital market.
Based on the above analysis, these questions arise, why do some sectors of the economy shy away from the capital market inspite of its numerous benefits? Are the disadvantages of capital market out weighing the advantages? This research work seek to answer these questions.

1.3 OBJECTIVE OF THE STUDY
This study is design to examine the role of the Nigerian capital market on economic development. Considering the fact that the ability of the government to carry through its capital programme depends on the availability of finance and that the economy remain undeveloped where fund is not available, hence, it is in the light of these I have chosen this topic to create general awareness among different sector of the economy how the Nigerian capital market can be of help to them. Therefore, the study is aimed at:
1. To examine the activities of the Nigeria capital market in economic development.
2. To know the problems and prospects of Nigerian capital market.
3. To make recommendations on how the activities of the Nigerian capital market can be improved. To further aid economic growth in Nigeria.

1.4 SCOPE OF THE STUDY
This study will as much as possible assess the Nigerian capital market. the rationale for its establishment, its roles and activities in the economy. It extends to the institutional operators of Nigerian capital market and their functions. Also it will outline the relevant factors hindering the activities of the Nigerian capital market and possible solution to the problems.

1.5 STATEMENT OF HYPOTHESIS
According to Mr. Aguwa (1998) there are two principal type of hypothesis Null (H0) and the alternative (H1) hypothesis. These hypothesis will be used in this research. 
1. The Nigerian Capital Market mobilize adequate fund for economic development
2. The fund raising activities of the capital market relates to industrial production growth rate.

1.6 SIGNIFICANCE OF THE STUDY 
This study “Role of capital market in economic development is designed for us to understand and appreciate the importance and functions of the capital market in shaping the Nigerian economic development landscape. The study is necessary because this suggestion and recommendations from the study is of great benefit to the government, individual investors, businesses and the general public. It encourages researchers, Investigators academics and professional on the need fro more research work and for more studies on those issue. And also it contributes to knowledge.

1.7 LIMITATION OF THE STUDY
The problems encountered in the course of this study includes:-
Time:- The time available to the researcher was not sufficient enough as to enable an extensive research into the topic as the researcher has to combine lectures, tests, assignments as well as semester examination.
Finance:- the great financial constraint the researcher encountered limited her transportation and the high cost of periodicals also militated against the research exercise.
Data:- traveling round to get the necessary data was not easy. Some staff of Nigerian stock exchange were in most cases unwilling to part the necessary information thus hindering the research.

1.8 DEFINITION OF TERMS
For the purpose of this research, the following operational terms shall be used and are hereby defined as follows.
CAPITAL MARKET:- This is a market in which financial assets with maturity of more than one year are bought and sold.
STOCK BROKERS:- it refers to the individuals or firm which engages in the sell or purchase of stock on behalf of the public limited liability company and the investors for a commission called brokerage.
ISSUING HOUSE:- This refers to investment banks or merchant banks which generally conducted the activities of a company which is to be quoted on the stock market. They are advisers as well as marketers of the firms shares. They receives payments or commission for their services.
STOCK:- This refers to the certificate of ownership of a firm. It is the right of ownership to a company. The stock owner has the right to a company.
FINANCIAL MARKET:- It I an institution that brings buyers and sellers of assets together (ie a market where financial assets and financial liabilities are brought and sold.
BOND:- It is a credit instrument and the holder is a creditor who receives a specified amount of interest and the bonds face value when matures.
JOBBERS:- Are stall holders in the market, buying shares from and selling shares to brokers acting on behalf of the public.
RIGHTS ISSUE:- These are new shares offered to an existing shareholders at a more favourable price than they will be offered to the general public.
CAPITAL:- This is the propelling factor of economic development
INVESTOR:- A person or institution who uses savings or borrowings to buy securities.
OFFER FOR SALE:- this is a system whereby existing shareholders offer their share holding or part of them for public subscription.