ABSTRACT
The effectiveness and growth of capital market in Nigeria economy is a problem that has assumed of recent an intractable dimension. The concept market is one of the compartments of financial system that promotes harm and investment in an economy. The stock exchange market is one of the key institutions of the capital market, a network or individuals, institution and instrument involved in the effective channeling of funds from the surplus to deficit economic unit.
The question whether a market undergone growth and development or not cannot be adequately answered by simply ‘Yes or No’ there are some issues to be addressed.
The main purpose of this study is to show how investors can dissever when a market has attained growth and development for their top investors to know the correctiveness of a price, which depends on the use of the information at time of the price decision.
Finally the study is designed to cover the practical and theoretical area of the stock market. The study is about the market and how effective it is in setting prices, which reflect the worth of the securities, traded in the market.
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND TO THE STUDY
The rate of economic development of any nation is inextricably linked to the sophistication of its financial markets.
Financial markets assist the nation of the world to give the needed financial resources and skills for growth and development.
Apart from promoting a sound and efficient payments mechanism, the financial intimidation.
The financial market is an institutional arrangement that facilities the intermediation of funds in an economy. By financial intermediation, it means mobilization of financial resources from surplus spending units and the channeling of such to deficit spending units and the channeling of such funds to deficit spending units for production investment and the generation of assets or securities in the process.
Thus the financial system generates a wide range of financial instruments (assets), which are means of transferring purchasing power and are tailored to suit the time preferences of both lenders and borrowers.
The financial market performs an economic function by facilitating the transfer of real economic resources from the lenders to the borrowers. By the inducement of interest income, the market facilitates the transference of purchasing power from the lender to the investor who wishes to exercise demand over resources.
When the financial market is efficient, funds flow freely and rapidly among its various sources and uses. As long as financial instrument remains substitutable for each other, changes in supply and demand in the money market have a rapid over effect into the capital market.
Financial markets are therefore constitutional whenever participants with aid of infrastructure technology and over devises facilitates the mobilization and channeling of funds into productive investments. The importance of the financial market lies in financial intermediation to link the deficit sector with the surplus of the economy. In the intermediation process, financial intermediaries engage principally in matching lenders and borrowers. They bring savers and borrowers together by selling debt instruments or securities and deposits to savers for money and lending that money to borrowers. As a result, the lenders of investors receive claims on investment, which have stable market value and high liquidity.
Financial intermediation does not ensure from direct lending and borrowing process but arises from the lending-borrowing proves, which involves the generation and exchange of debt instrument or securities. The point of emphasis therefore is the financial intermediaries use their own liabilities to create additional assets, help mobilize funds, gather together to reap economics of scale and minimize the investors.
The financial markets system features a wide array of banking and non-banking financial intermediaries. The banking sub-sector of the system comprises Commercial and Merchant Banks, Development Bank and Central Bank, as the Apex institution.
The non-bank financial institution sub-sector includes a wide range of organizations operating as regulators, facilitators and investors. The list includes the Securities and Exchange Commission Market in Nigeria, to assess its impacts on Nigeria economy. In order to achieve its major (SEC), the Stock Exchange, Stockbrokers, Regionals, Insurance companies, Pensions and Provident funds and Investment Companies.
The financial market is really segmented into two major markets, which are:
1. Money Market
2. Capital Market
The money market is the market for short-term funds an securities including treasury bills, treasury certificates negotiable certificates of deposits, commercial paper and other funds of less than one year duration on the other hand, the capital market is the market for long-term funds and securities whose tenure extends beyond one year. These include long-term loans, mortgage, bond, preference share, ordinary shares, federal government bonds and industrial loans.
The capital market is a complex institution and mechanism through which intermediate and long run funds are made available to government, business (firm) and individuals. The capital market therefore is an instrumental arrangement that performs the function of mobilizing private and public savings from surplus spending units and channeling them to the deficit units for the production of goods and services. Unlike the many money market which primarily exist as a means of liquidity adjustment, the capital market provides a bridge of transforming saving into long term investment by using equity bonds, debentures, mortgages and investment stocks to facilitate intermediation.
The market makes it possible for private and public sectors of the economy to rise long-term capital to execute government development programmes and from the expansion and modernization of the private business to enhance outputs, employment and income. The capital market is often described as an important part of country’s economy, which is indispensable to economy growth and development. In short, it is a place where nation’s wealth is bough.
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