ABSTRACT
This research work examines the impact of Capital Market Financing on Economic Development in Nigerian. It also examined theories that have postulated the key role of capital accumulation in the process the economic development of nation. Although, capital can be mobilized from different sources, both theoretical and empirical analysis have different long term sources of finances are more veritable from productive capital investment. Consequently, the capital market plays a key role in this mediation process.
Emphases have been placed on indicators of stock market size, liquidity and growth over a period of twenty tears; together with their combined effects on the rate of economic growth and development within the Nigerian context. Empirical data were collected and analyzed. The result of the analysis showed a positive relationship between the independence variables measures and their impacts on economic growth in Nigeria as measured by the gross domestic product (GDP).
However, linking the paucity in capital market instruments as well as expansion of capital market finances to increase in real productive investment and development it was discovered very little is achieved in is respect.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Economic development form of the core macroeconomic objectives which every nation strives to achieve. It is a state of sustained increase in the real per capital income, which is not accompanied by widening inequality and without increasing the number of people living below the poverty line (Jhingan, 1981). Thirlwall (1983) stressed that development holds when there is an improvement in basic needs and economic progress has contributed to a greater sense of self esteem for the countries and individuals within it and material advancement has expanded the range of choice for individuals.
In a nutshell, economic development is conceptualized as economic growth, accompanied by desirable social change or equitable distribution of income and socially optimal resources. 'Utilization' (Fashola 1998).
From the foregoing, it become evidence that economic development inevitably involves economic (growth). The growth process typically involves instituting long term investment projects that are capable of stimulating the productive capacity of the economy.
In the third world countries policy makers a d the international community have always expressed great concern about the level of under development. The need for a reduction in the level of poverty, increase industrial capacity utilization, reduce the rate of the unemployment, price stability among others are some of the consideration of those in government.
The achievement of the laudable objectives of economic development is hanged on the availability old the necessary infrastructures, which facilitates the mobilization of development input and all these are long term in nature. It then follows that the success of any economic development effort will be dependent on the availability of long term financing, which would support long term investment.
The link between the capital market and economic development is that the capital market provides this long term financing arrangements.
The Collins dictionary of economics defined capital market as a “market for long term company loan capital, share capita and government bonds. In the same vein, it has been described as the "complex of institutions and mechanism through which intermediate term funds and long term funds are pooled and made available and instruments already outstanding are transferred". Kadiri (1992) also defined capital market as a market where scarce long term funds are mobilized and efficiently allocated to achieve economic growth and development. Furthermore, it has been described as an exchange mechanism that brings together sellers and buyers of a product or service, factors of production of financial securities".
The capital market principally, act as financial intermediary that help to mobilize funds from the surplus sector to the deficit sector of an economy in order to foster the ace of economic development.
The cores of the capital market are the banks d the stock exchange market. Both of them differs in the type of services that they render; but theories and empirical investigations have been advanced at they contribute significantly to the economic development of any nation.
For instance, in a study conduct by Levine an Zervous (1996) using data of forty nine (49) countries from 1976 to 1993, they discovered that of stock market liquidity, size, volatility and integration with international capital accumulation, productivity improvements and private savings.
The existing literatures clearly show that dev loped economies had explored the two channels through which resources mobilization affects economic growth and development - money and capital market (Samuel, 1996; Demigue - Kunt and Levine, 1996). This is however, not the case in developing economies where emphasis is money market with little consideration for capital market (Nyong, 1997). Since the introduction of Structural Adjustment Programme (SAP) in Nigeria, the country's stock market has grown very significantly (Alile, 1996; Soyede, 1990). This is as a result of deregulation of the financial sector and the privatization exercise which exposed investors and companies to the significance of the Stock market. Equity finance became one of the cheapest and flexible source of finance from the capital market and remains a critical element in the sustainable development of the economy (Okereke - Onyiuke, 2000).
The link between stock market performance and economic growth has generated strong controversies among analyst based on their study of emerging market (Samuel, 1996 Obadan, 199 ). According to Nyong (1997), the financial structure of a firm that is the mix of debt and equity financing changes as economics develop. The tilt is however more
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