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An Analysis Of The Economic Impact Of Stock Market On Nigerian Economy (1986-2010)
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Many emerging stock markets are being restricted by lot complaints which
impede the realization of capital market serving as a catalyst for
economic growth. Such problems include:
A.Unquoted companies: Many
companies are not quoted because of perceived loss of control. They are
afraid of sharing the ownership of the company with others
and because of this reason they prefer to restrict themselves to funds
provided by family members and friends and are therefore unable to
unanticipated challenges in a timely manner.
B. Domination of public
sector: The dominance of public sector like government s has greatly
hindered the capital market growth as many them are yet to be
privatized(especially the public utilities)that can deepen the market
almost immediately.
C. A lot of sharp practices exist in the flow of
the exchange fostering improper disclosure of information,
unfairpricing, insider dealings e.t.c
Currently, the performance of
the Nigerian stock market during the last month rallied 118 points or
7.3%. from 2013, the Nigerian stock market average 1106 index points
reaching an all time-high of 1718 index point in may 2013 and a record
of 848 index points (NSE 30). This rise and fall of the Nigerian stock
market index point has resulted in the slow meltdown of the capital market. This meltdown of the capital market could result in unbalances on the economy.
According
to the NSE report the process of this rise and fall began in January
2007 as the capital market nose-dived from all time high of ₦13.5
trillion to less than ₦4.6 trillion by the second week of January. The
all share index has also plummeted from abroad 66,000 basis points to
less than 22,000 points in the same period. It has also experienced a
free for all downward movement with more than 60% of 300 quoted stocks.
Consequently, many of the quoted stocks lack liquidity as their holders
are trapped, not able to convert to cash to meet their domestic needs
thereby creating a major problem. When this occurs, stockholders begin
to withdraw and foreign investments are lost and this results to a
negative developmenton the Nigerian economy.
1.3 OBJECTIVES OF THE STUDY
The
central objective of this study is to analyze the economic impact of
stock market on Nigerian economy. The specific objectives include;
1. To examine the relationship between stock market and Nigeria’sgross domestic product.
2. To assess the level of stock market stability in Nigeria.
3. To appraise the performance of the Nigerian stock market.
4. To make policy recommendations at the end of this study.
1.4 RESEARCH HYPOTHESIS
The research work is guided by the following hypothesis.
1. Ho: There is no significant relationship between stock market and Nigeria’s gross domestic product.
H1: There is a significant relationship between stock market and Nigeria’s gross domestic product. 20
2. Ho: Stock market does not have economic impact on the Nigerian economy.
H1: Stock market has economic impacts on the Nigerian economy.
1.5 SIGNIFICANCE OF THE STUDY
The
general relevance of the study lies in its understanding of the
Economic Impact of Stock Market on Nigerian economy and so will be
particularly relevant in the following areas.
A. In particular, by
using Nigeria stock market as empirical evidence, the research will
provide quantitative information which will enable us to ascertain
whether or not stock price fluctuations have impact on the Nigerian
economy. The finding of the study will reveal or will therefore be
relevant to the government and policy makers in fine-tuning stock market
policies that will be applied to ascertain sustainable in the Nigerian
stock market.
B. Also, it will relevant to the stock market
operators, monetary institutions or authorities and regulating agencies
to harness and fine-tune stock market prices to
promote high performance level especially at this critical moment of
global economic crises and the nation’s economic circumstances.
C.
The findings if the study will equally afford quoted companies the stock
opportunity to assess whether or not they have been performing well in
terms of price stability.
D. Finally, a further justification for
the study is the benefit of applying the economic analysis of the impact
of stock market in Nigeria to economic and financial analysis kits and
increases the stock of knowledge in both the stock market and the
Nigerian economy.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
This
work is a study of economic impact of stock market on the Nigerian
economy. The study employs empirical evidencefrom both stock market
using the Nigerian stock exchange and Nigerian economy as whole. The
choice is made out of the researcher’s interest in the given country’s
stock market and economic circumstances. The period covered
by the research is twenty-five (24) years period 1986-2010. The
availability of uniform data on the variables informed the researcher’s
choice of the period of analysis.
This study is limited by the following factors;
1. Paucity of materials: Materials for the study were not adequate which could not allow for an in-depth study.
2. Inaccessibility of data: Difficulty in accessing data for the study was yet another limitation.
3. Financial constraint: Lack of adequate funds on the part of the researcher constituted another problem.
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ABSRACT - [ Total Page(s): 1 ]A major engine of economic growth and development of any nation is the stock market. It impacts positively on the economy by providing financial resources through its intermediation process for financing long term projects. These projects could be promoted by governments or private institutions. The analysis scope covered a period of twenty-five years spanning from 1986-2010. The econometric methodology adopted is the Ordinary Least square method (OLS). Using the independent variables of market ... Continue reading---
