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PROJECT TOPIC  : THE ROLE OF CAPITAL MARKET IN ECONOMIC GROWTH OF NIGERIA (1986 - 2013)

PROJECT PROPOSAL

BACKGROUND OF STUDY
The capital market is a highly specialized and organized financial market and indeed essential agent of economic growth and development (Odetayo and Sajuyigbe, 2012; Okoye and Nwisienyi, 2013) because of its ability to facilitate and mobilize saving and investment (Okodua and Ewetan, 2013; Donwa and Odia, 2010). Shallu (2014) describes the capital market as a market where borrowing and lending of long term funds takes place involving both debt and equity like shares, debentures, bonds etc. She points that capital market plays a very important role in promoting economic growth through the mobilization of long-term savings and the savings get invested in the economy for productive purpose.

Yadirichukwu and Chigbu (2014) state that capital market contributes to economic growth through the specific services it performs either directly or indirectly, notable among these functions are: mobilization of savings, creation of liquidity, risk diversification, improved dissemination and acquisition of information, and enhanced incentive for corporate control. Liliana (2014) reveals that deep capital markets in emerging market economies support efficient allocation of resources by complementing banks’ financial intermediation role, they can increase economic agents’ capacity to manage financial risks and their resilience in the face of unexpected shocks. Also, he states that deep capital markets foster firms’ financial integrity through market discipline and the need to comply with internationally accepted standards on accounting practices, transparency and governance, among others. Adeusi, et al. (2013) opine that capital market is a driver or lubricant that keep turning the wheel of the economy to growth and development because of its imperative function of not just mobilizing long term funds and channelling them to productive investment but also efficiently allocating these funds to projects of best returns to fund owners. However, from a microeconomic perspective, Kaserer and Rapp (2014) argue that the positive impact of stock markets is related to two major channels: (i) availability of funds for long-term risky investments; and (ii) incentives for improving corporate governance. They provide new evidence for both effects, highlighting the importance of stock markets for financing of innovations and for attracting independent institutional investors.

To a great extent, the positive relationship between capital accumulation and real economic growth has long been affirmed in economic theories (Anyanwu, 1996; Osamwonyi and Kasimu, 2013). Success in capital accumulation and mobilization for development varies among nations, but it is largely dependent on domestic savings and inflows of foreign capital (Osamwonyi and Kasimu, 2013; Okoye and Nwisienyi, 2013). Therefore, to arrest the menace of the current economic downturn, effort must be geared towards effective resource mobilization. It is in realization of this that consideration is given to measures for the development of capital market as an institution for the mobilization of finance from the surplus sectors to the deficit sectors (Adeusi, et al. 2013).

Owolabi and Ajayi (2013) posit that the links between saving, capital formation and economic growth on the one hand and direction of causality on the other, still remain subject to further analysis across countries stressing that accepting that the relationship is unidirectional (i.e. moving from savings to investment and hence to economic growth) may be misleading. Therefore, this project work will examine the role of the capital market in harnessing and mobilizing these resources to generate economic growth in the country and consequently, economic development.

STATEMENT OF THE PROBLEM
There is abundant evidence that most Nigerian businesses lack long-term capital. According to Donwa and Odia (2010), the paucity of long-term capital has posed the greatest predicament to economic development in most African countries including Nigeria. The business sector has depended mainly on short-term financing such as overdrafts to finance even long-term capital. Based on the maturity matching concept, such financing is risky. All such firms need to raise an appropriate mix of short- and long-term capital (Demirguc-Kunt and Levine 1996).

Although, most recent literatures on the Nigerian capital market have recognised the tremendous performance the market has recorded in recent times, Ngerebo and Torbira, (2014) reveal that there are two divergent opinions on the role of capital market activities in Nigeria; the first view is that capital market activities synchronize the divergent preferences of portfolio managers and financial institutions and those of savers by mobilizing long-term funds; the alternative view is that the capital market merely promote investment in consumer goods and not the acquisition of new fixed assets that are invested rather than consumed. However, the vital role of the capital market in economic growth and development has not been comprehensively investigated thereby creating a research gap in this area. This study is undertaken to examine the contribution of the capital market in the Nigerian economic growth and development. Aside the social and institutional factors inhibiting the process of economic development in Nigeria, the bottleneck created by the dearth of finance to the economy constitutes a major setback to its development. As a result, it is necessary to evaluate the Nigerian capital market.

OBJECTIVES OF THE STUDY
The broad objective of this study is to examine the activities and performance of Nigerian capital market.
The specific objectives of the study are as follows:
1. To evaluate the performance of the capital market in relation to the economic growth in Nigeria;
2. To examine the operations of the Nigerian capital market;
3. To examine the rate at which new stocks are issued on the capital market.
4. To make recommendations as to how the operations of the market could be improve to boost economic growth and development of Nigeria.

RESEARCH QUESTIONS AND HYPOTHESIS
This research shall be guided by the following research questions:
1. How does the capital market impact on the economic growth and development process in Nigeria?
2. What is the trend of trading activities on the Capital Market?
3. What is rate at which new stocks are issued on the Nigerian capital market?
4. How could the capital market through its crucial role stimulate economic growth in Nigeria?

STATEMENT OF HYPOTHESIS
The hypothesis that would be tested in the course of this research is stated below as:
H0: That the capital market operations have not contributed to Nigerian economic growth.

SOURCES OF DATA AND BRIEF METHODOLOGY
The data for this study would be obtained mainly from secondary sources, particularly from Central Bank of Nigeria (CBN) publications and that of the Federal Office of Statistics and relevant journals, textbooks and financial newspapers. The data to be collected include: Gross Domestic Product, market capitalisation, All-Share index, market volume and market turnover.

The research work will make use of the econometric procedure in estimating the relationship between capital market operations and Nigerian economic growth. The Ordinary Least Square (OLS) technique will be employed in obtaining the numerical estimates of the coefficients in the model formulated below. The OLS method is chosen because it possesses some optimal properties; its computational procedure is fairly simple and it is also an essential component of most other estimation techniques. The estimation period will cover 1986 through 2013 due to the non-availability of some important data.

SCOPE OF THE STUDY
The economy is a large component with lot of diverse and sometimes complex parts; this research work will only look at a particular part of the economy (the financial sector). This work will not cover all the facets that make up the financial sector, but shall focus only on the capital market and its activities as it impacts on the Nigerian economic growth. The empirical investigation of the impact of the capital market on the economic growth in Nigeria shall be restricted to the period between 1986 and 2013 due to the non-availability of some important data.

SIGNIFICANCE OF THE STUDY
The study will explore the impact or effectiveness of capital market instruments on Nigerian economic growth. Though the scope of study will be limited to the capital market, it is hoped that the exploration of this market will provide a broad view of the operations of the capital market. It will contribute to existing literature on the subject matter by investigating empirically the role, which the capital market plays in the economic growth and development of the country. The main importance of this study is that it will provide policy recommendations to policy-makers on ways to improve operations and activities of the capital market.

PLAN OF THE STUDY
The study shall commences by providing a background of the subject matter justifying the need for the study in chapter one. Chapter two shall present related literature concerning the role of capital market in economic growth and development. The chapter shall also present the theoretical framework for the study. The research methodology shall then be outlined in chapter three while the chapter four focuses on the data presentation and analysis. Concluding comments in chapter five shall reflect on the summary, conclusion and recommendations.



REFERENCES
Adeusi, S. O.; Sulaiman, L. A. and Azeez, B. A. (2013) “Impact of Capital Market Development on the Nigerian Economy: A Post-SAP Analysis”. Journal of Economics and Behavioral Studies. Vol. 5, no. 1, pp. 1-7.
Anyanwu, J. C. (1996) Monetary Economics: Theory, Policy and Institutions. Lagos: Hybrid publishers limited.
Alile, H. I. and Anao, R. A. (1986) The Nigerian Stock Market in Operation. Lagos: Jeromelaiho and Associate Limited.
Demirgüç-Kunt, A. and Levine, R. (1996) “Stock Market, Corporate Finance and Economic Growth: An Overview”. The World Bank Review. Vol. 10, no. 2, pp. 223-239.
Donwa, P. and Odia, J. (2010) “An Empirical Analysis of the Impact of the Nigerian Capital Market on Her Socio-economic Development”. Journal of Social Sciences. Vol. 24, no. 2, pp. 135-142.
Kaserer, C. and Rapp, M. S. (2014) “Capital Markets and Economic Growth: Long-Term Trends and Policy Challenges”. The Alternative Investment Management Association Research Report. March, pp. 1-88.
Liliana, R. S. (2014) “Towards Strong and Stable Capital Markets in Emerging Market Economies”. Center for Global Development (CGD) Policy Paper. No. 42, pp. 1-8.
Ngerebo-A, T. A. and Torbira, L. L. (2014) “The Role of Capital Market Operations in Capital Formation”. Journal of Finance and Investment Analysis. Vol. 3, no. 1, pp. 21-33.
Odetayo, T. A. and Sajuyigbe, A. S. (2012) “Impact of Nigerian Capital Market on Economic Growth and Development”. International Journal of Arts and Commerce. Vol. 1, no. 5, pp. 1-8.
Okodua, H. and Ewetan, O. O. (2013) “Stock Market Performance and Sustainable Economic Growth in Nigeria: A Bounds Testing Co-integration Approach”. Journal of Sustainable Development. Vol. 6, no. 8, pp. 84-92.
Okoye, V. O. and Nwisienyi, K. J. (2013) “The capital market contributions towards economic growth and development; the Nigerian experience”. Global Advanced Research Journal of Management and Business Studies. Vol. 2, no. 2, pp. 120-125.
Osamwonyi, I. O. and Kasimu, A. (2013) “Stock Market and Economic Growth in Ghana, Kenya and Nigeria”. International Journal of Financial Research. Vol. 4, no. 2, pp. 83-98.
Owolabi, A. and Ajayi, N. O. (2013) “Econometrics Analysis of Impact of Capital Market on Economic Growth in Nigeria (1971-2010)”. Asian Economic and Financial Review. Vol. 3, no. 1, pp. 99-110.
Shallu (2014) “Indian capital market and impact of SEBI”. Tactful Management Research Journal. Vol. 2, Iss. 4, pp. 1-10.
Yadirichukwu, E. and Chigbu, E. E. (2014) “The impact of capital market on economic growth: the Nigerian Perspective”. International Journal of Development and Sustainability. Vol. 3, no. 4, pp. 838-864.

 

 

PROJECT PROPERTIES
Project Status
Available
Number of Chapters
5
Number of Pages
133
Number of Words
22,924
Number of References
71
Project Level
B.Sc.
Price
N10,000 (Non-Negotiable)
Abstract, Regression Data and Results are included
How to Pay for this Project . . . .CLICK HERE

Keywords: nigeria capital market, raising capital, stock exchange nigeria, lagos stock exchange, stock exchange in nigeria, risk management in capital market, venture capital market, capital spread betting, business capital investment, venture capital, forex capital markets, business capital, capital funding, small business capital

 

 

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