ABSTRACT
This research work is aimed at showing the role of capital market on development of Nigeria Economy. It also examined the various economic theories that have postulated the key role of capital accumulation in the process the economic development of any nation. The data used were secondary data sourced from CBN and FBS statistical bulletin and the method of analysis used is the econometric technique with special focus on multiple regression analysis.
Although, capital can be mobilized from different sources, both theoretical and empirical analysis have shown that long term sources of finances are more veritable for productive capital investments. 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 thirty years; together with their combined effects on the rate of economic growth and development within Nigeria context. Empirical data were collected and analysed. The result of the analysis showed a positive relationship between the independent variables measured and their impact on economic development in Nigeria as measured by the gross domestic product (GDP). However, linking the paucity m capital market instruments as well as expansion of capital market finances to increase in real productive investment and development, it was discovered that very little is achieved in this respect.
CHAPTER ONE
1.1. INTRODUCTION
It is a known fact that the investment that promotes economic growth and development requires long term funding, far longer than the duration for which most savers are willing to commit their funds.
Capital market is a collection of financial institutions set up for the granting of medium and long term loans. It is a market for government securities, for corporate bonds, for the mobilization and utilization of long-term funds for development - the long term end of the financial system. In this market, leaders (investors) provide long term funds in exchange for long term financial assets offered by borrowers.
This market embraces both the new issues (primary) market and secondary market. Such securities might be raised in an organized market such as the Stock Exchange. In this sense, it involves consortium under writing, syndicated loans and project financing. Thus, it is a mechanism whereby economic unit desirous to invest their surplus funds, interact directly or through financial intermediaries with those who wish to procure funds for their businesses.
In the Nigerian context, participant includes Nigerian Stock exchange, Discount Houses, Development banks, Investment banks, Building societies, Stock Broking firms, Insurance and Pension Organizations, Quoted companies, the government, individuals and the Nigerian Stock Exchange Commission (NSEC).
The capital market is therefore very important to any economy because, it encourages savings and real investment in any healthy economic environment. Through the market, aggregate savings are channeled into real investment that increases the capital stock and therefore economic growth of the country.
More so, the capital market synchronize the divergent preferences for portfolio managers and financial institutions and those of savers by mobilizing long - term funds for portfolio managers and financial institutions while providing avenues for savers to invest when the need arises through the secondary market, without affecting the operation of the firm, their savings had earlier financed. In other words, through the secondary market, the capital market converts long-term or perpetual investment enlarged and economic growth accelerated.
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