An analysis of the economic impact of stock market on nigeria economy (1986-2010)

Project Abstract

This research study aims to analyze the economic impact of the stock market on the Nigerian economy from the years 1986 to 2010. The Nigerian stock market plays a crucial role in the country's economic development, as it provides a platform for raising capital, promoting investment, and fostering economic growth. By examining the trends and patterns of the stock market over a 25-year period, this study seeks to assess how the performance of the stock market has influenced various economic indicators in Nigeria. The methodology employed in this research involves collecting and analyzing data from secondary sources such as the Nigerian Stock Exchange (NSE), the Central Bank of Nigeria (CBN), and the National Bureau of Statistics (NBS). Various economic indicators such as GDP growth rate, inflation rate, foreign direct investment (FDI), and unemployment rate will be examined to determine the relationship between the stock market performance and the overall economic performance of Nigeria. The findings of this study are expected to provide valuable insights into the dynamics of the Nigerian stock market and its impact on the broader economy. By understanding how fluctuations in the stock market affect key economic indicators, policymakers, investors, and other stakeholders can make informed decisions to promote sustainable economic growth and stability in Nigeria. Additionally, this research will contribute to the existing literature on the relationship between stock markets and economic development in developing countries, particularly in the context of Nigeria. Overall, this research study aims to contribute to a better understanding of the role of the stock market in shaping the Nigerian economy and provide evidence-based recommendations for improving the efficiency and effectiveness of the stock market as a driver of economic growth. By shedding light on the economic impact of the stock market in Nigeria from 1986 to 2010, this study seeks to inform future policy decisions and investment strategies that can help maximize the benefits of a well-functioning stock market for the Nigerian economy.

Project Overview

<p> </p><div><p><strong>1.1 BACKGROUND OF STUDY</strong></p><p>The stock market is supposed to play an important role in the economy in that it mobilizes domestic resources and channeling them towards productive investments. However, to fulfill this role, it must have a significant relationship with the economy. The stock market development in Nigeria, as in other developing countries has been driven by the government. Long before the creation of the stock market in Nigeria, there was a less formal arrangement for market operations at the bourse. It was not important until the visit of Mr. JB Lobynesion in 1959, at the invitation of the federal government, to advise on the role of the central bank may play in the development of the money market and local stock. Following this, the government has commissioned and set up a committee to study Barback and make recommendations on ways and means to establish a stock market in Nigeria as a formal market. (Alile and Anao 1990) The capital markets are key elements of a modern economic system based on the market as they serve as channel for the flow of capital resources for capital investors borrowers. Efficient financial markets are essential for economic growth and prosperity. With the increasing globalization of economies, international capital markets are increasingly integrated. Although integration is positive for global economic growth, the downside risk is the contagion effect of the financial crisis, especially if it originates in major markets. As for the effect of macroeconomic variables such as money supply and interest rates on stock prices, the efficient market hypothesis suggests that competition between the impact of profit maximization investors of macroeconomics. Variables on the stock market will ensure that all the relevant information currently known about the changes in macroeconomic variables are fully reflected in the current stock market, so thatinvestors will not be able to earn abnormal profit by predicting future investments in the stock markets. (Chong and Koh 2008). Therefore, since investment advisors would not be able to help investors earn higher returns than average, except through constant access to insider information employer. Exchange is a critical newspaper in the wheel that smoothens the transfer of funds for economic growth. In general, scholarships should accelerate economic growth by increasing the liquidity of financial assets, which makes it easier for investors global diversification and promotion of wise investment decisions. In principle, a well-functioning stock market can aid economic growth and development process in an economy by the growth of savings, the efficient allocation of investment resources and alluring foreign portfolio investment. The stock market encourages savings by providing household with investable funds, an additional financial instrument that meets their risk preferences and liquidity needs better, it provides for individuals with relatively liquid means risk sharing in investment projects. (Agrawalla 2006). The ability of stock markets to contribute to the development of the economy was largely marred by various inadequacies. The market over the years have been characterized by lack of depth with some illiquid securities, partly due to the inefficiency of the poor infrastructure for operations Basically, the secondary market, a stock market for transactions up bond market largely dormant cost Lack of sophisticated investment products and instruments. The market is mainly dominated by traditional instruments such as bonds and equities with limited adverse tax-derived unstable regime and largely inappropriate in a macroeconomic environment.</p><p><strong>1.2 STATEMENT OF PROBLEM</strong></p></div><h3></h3><br> <br><p></p>