CHAPTER TWO LITERATURE REVIEW 2.0 INTRODUCTION This chapter Is a review of some relevant on the role of capital market in the economic development of NIGERIAN, and present and overview of the Nigerians capital market in term of definition, evolution and structure, also trace empirically the temporally growth and contributions of the capital market in a fairly exhaustive manners as if relates to economic development. 2.1 CONCEPTUAL REVIEW GENERAL BACKGROUND OF NIGERIA ECONOMY Nigeria economy is make up of many interacting sectors namely, primary, secondary and tertiary sectors. As an independent country, Nigeria is predominantly an agricultural based nation al it produce cocoa, palm oil and palm kernel, groundnut, cotton, hides and resources such as, crude oil columbine limestone’s, coal etc The Nigeria economy, since independence saw a viable agriculture sector in which there was self sufficiency in food production and cash cropping that formed the basis of foreign exchange earnings, the various marketing present there was the pillars of export trade. Some after the crude oil production and export began to gain prominence in post war Nigerian, the glory agriculture was lost giving rise to rapid rural urban migration, Nigeria the became a large scale importer if some of its rest while major export products such as palm oil in 1979, imported rice also became the staple food of the nation “operation feed” the nation scheme of the general Obasanjo’s administration and the green revolution programmed of Shagari’s regime represented some of the frantic effort of government to put agriculture back in its place. Then came the subsequent discovery to oil deposit in Alaska Mexico and north sea with a resultant fail in the demand for light crude and the glut in 1981 in international oil, market had a several repercussion on the Nigerian economy. The various austerity a stemming import by the various administration is no effect as the nation was at brink edge of bankrupting in 1985. Even the struck and tough austerity measure by Buhari’s regime to arrest the situation produced little effect the most aggressive shift in the economy policy in this country was undertaken by Babangida’s regime in the name of the structural adjustment programmed SAP in 1986. We indeed of trade liberalization, local economy devaluation, the renewal of international. All of which have contributed to the growth of Nigerian capital market. The Nigerian economy not yet out of the word as economic progress was hampered by the decline in commodity price and civil strike which is constructed strong impediment to economic growths and attraction of foreign instrument to the country. For example the 1912 final year witnessed a declining pace of economic growth as a term of gross domestic on 1984 at constant rate or cost grows by a lower rate of 4.1 % of actual 1991 and 5.7 % of 1993. Aggregate agriculture output also grows by 4.5% in 1996 compared to 5.9% on 1995, the down turn having been attributed to the weakening of the performance of the crop sub-sector due to unfavorable weather condition and the bottle neck of the fertilizer distribution. On the part of industrial sector, it was affected by high interest rate which characterizes the financial system and the high depreciation of the naira both of which led to high cost of production in this effect, the price of consumer goods witness, within the year as reported in the half of 1996. Mining and manufacturing production had setting by 3.7% and 2.8% respectively. As a result of this, the prevailing colonic and political situation in Nigeria are reflected in low productivity, non-bank financial institution also slow growth and unaway, inflation continue to plague the country 2.12 EVOLUTION AND DEVELOPMENT OF NIGERIA CAPITAL MARKET This history revealed that the market know today as date back to the first government securities in 1946 and the listing of the right securities on the Lagos stock exchange which opened for business in 1941,with stock broker and one trading floor. The emergency of the institution of the capacity market as spontaneity us reaction of enterprising business economics of the middle ages and the area of the industrial revolution. A situation where sailing and investment are carried out by two distinct group of people created by a need for some various type of financial institution of tradition stuffs and allied roles, all these institution of tradition stuffs and general designation of the capital market. Hence, the capital market is highly needed because of the following reason Mobilization and allocation of financial resources for the enhancement of development process. For effective distribution of the available financial resources Elimination of distribution in the sartorial pattern of flow of funds in the economy. For capital market to discharge these functions, such as market requires Arrange of financial instruments capable of accommodating the need of those supplying and those seeking to raise funds. Mechanism whereby the price of fund can be determined in affairs and consistent manner, capital market are created by a number of institution and arrangement that follows the supplier and demand of long term fund to make transactions. U.TunWa:1980 defined capital market as the one that refers to the entire organized financial system including commercial bank and other financial intermediaries’ non-monetary financial claims. An intermediate definition of capital market dealing in long term credit conventionally – defined as having a maturity in excess of the year including stock government and private mortgages, is where stock common and equity claims of ownership and bond including debentures and convertible bonds are brought and gold using the services of the brokers, dealers and under writers. Companies requires finance as many and various occasion according to their different circumstance and needs, an analysis of corporate capital raising according to the nature of the financial needs. The identified three categories of capital are! Capital requires to starts up new business start-up capital Capital requires developing or preserving existing business development capital Capital for new technology and high risk venture capital 2.13 STRUCTURE OF NIGERIAN CAPITAL MARKET The Nigerian capital market exist to provide facilities to the government and private sectors to raise long-term capital execute their development program and also to finance expansion and modernization of industrial project and it is trading with four floor or branches at Lagos, Kaduna, port-Harcourt and Ibadan. There are two markets within Nigerian capital market for publicity of securities; they are the primary and secondary markets. The primary market operation is where the initial capital raising takes place. Securities and Exchange Commission sit at the apex of the primary market regulating the issue of public and private companies with issue new sherry and all other securities. In primary market activities, the stock holders, issuing houses, merchant bank, central bank of Nigerian and the government plat prominent roles such as Offer for subscription-: these are direct issue to the public investor floating a member of share or debenture, stock or bonds, process of the offer to the company or government which offer shares or bond. Offer for sale-: sale of share by existing share holder in the public, proceeds go the seller of such share. Most operation of the technical committee on privatization and commercialization are offered for sale and so the proceeds go

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CHAPTER ONE INTRODUCTION BACKGROUND TO THE STUDY History reveals that the market we know today dates back to the floating of the first government securities in 1946 and listing of eight securities on the Lagos stock exchange which opened for business in 1961 with a stock broker and one trading floor. The emergence of institution of the capital market as a spontaneous reaction of enterprising business to the opportunity and challenges offered by the emerging to the free enterprise economy of the middle ages and the era of the industrial revolution that be queath the institution, a character which remains tropical up till today . There, the market is now much broader and more diversified with activities taking place on and off the Nigerian stock exchange, under a free enterprise system which we now operate in Nigerian and as an important part in the economic life of the nation. Broadly defined the term “capital market” includes financial institution providing short, medium and long terms loans to finance both consumption and investment. In the narrowest sense, the term “capital market” involves the problems and prospects of equity investment; this involves the issues and market of shares, bonds and debentures using the services of brokers, dealers, and underwriters. The capital market in any economy is a forum for capital formation and distribution among economic units. It provides a meeting point for units which have surplus saving to invest and units which are in need of producing capital to finance investment. It is a set of complex institution arrangement and interrelated activities that facilitate the transfer of old saving to new investment and exchange of securities. The term “capital market” is not a single entity it is rather a network of specialized finance entities in various ways arranges for medium and long term financial assets of securities such as shares, debentures, stock and mortgages. The capital market put in other way is the market for the mobilization and utilization of medium and long term funds for development and expansion purpose it can also be referred to the market for buying and selling of shares in limited companies thus a capital market exists to assists in the transfer of funds from “excess” units savers to the deficit unit in the modern economy. Added to the capital market is an integral part of the country financial system where money as financial capital are bought and sold in a medium of long term basis to business organization and government institution. Through its pricing mechanism, it provide industrial management with some idea of the current cost of the capital and this can be important in determine the level and rate of investment while it can also act as a viable medium for boarding the ownership base fromthe errs while formed family dominated forms. The capital markets embrace both new issues primary and securities secondary market securities are instrument by which a company or companies and other organization retrieve money from the surplus units within the economy for the purpose of formulation this capital is the engine of solo-economy group and development of any given nation. Economic development according to MURDAL 1957 is not the substantial increase in the output of an economy but a total up words movement of a society as evidenced by the attachment for some or all of the things which the society rewards as ideal for modernization sustained rise in the level of productivity improve knowledge for institution of social and economic equality and quality the retrieval of undesirable condition which partiality hinder economic development modernization available resource of mineral wealth capital financial and materials quality man power and entrepreneur skills are important ingredient of rapid economic development. Capital is the most important ingredient as it expenditure production process which permit a roundabout method of production heading to a free use of capital equipment an entrepreneur seeking to take his or her idea from conception to fruition will inevitably have chosen between various sources of capital in looking at various sources of capital the aim is to identify and attract the most suitable source for the needs and plan of the entrepreneur capital market therefore are partially important in the economic development because their role in capital accumulation and capital investment are highly valued. Gerald Meir 1971 economic development as the process whereby the level of per capital income of a country increase over a longer period of time “process” is emphasized because this implies the operation of certain forces in an alter connected economy also the long period time is stressed because its significance from the standing point of development o a sustained increase In real income and na simply a short period such as it occur during the business curve. Economic development is generally defined to include important improvement in material welfare and the com position of inputs and output that generally include shift in the underlying structure of production away from agriculture toward industrial activities of organization of economy in such a way that productive employment is generally among the working age population rather than the corresponding greater participation of broadly based groups in making decision about the duration of economic and otherwise in which they should strive more to improve their welfare. To this end effective and efficient capital market is essential for a viable investment climate and economic development of the study STATEMENT OF RESEARCH PROBLEM There is an abundant evidence that most Nigerian business lack long term capital according to DONWA and ODIA 2010 the poverty of long term capital imposed the great predicament to economic development in most African country including Nigerian The business sector has depended mainly on short term finace which is risky as a result such firm need to raise an appropriate mix of short and long term capital DERMIGVE,KUNT AND LEVINE 1996 most recent literature on the Nigerian capital market have organized the tremendous performance the market has recorded in recent times however the vital role of the capital market in economic growth and development has not been comprehensively investigated not been comprehensively investigated thereby creating a research gap in this area. Lastly the significant of the exercise is to stimulate economic political business social and research interest to various aspect Nigeria market. RESEARCH QUESTION What is the impact of capital market in the development of Nigeria economy? What impact does government policies has on the Nigerian capital market? OBJECTIVES OF THE STUDY To determine the impact of capital market in development of Nigeria economy. To examine the relationship between government policies and Nigeria capital market RESEACH HYPOTESIS Ho1: there is no significant relationship between capital market and development of Nigeria economy Ho2: there is no significant relationship between government policies and Nigeria capital market. SIGNIFICANCE OF THE STUDY The buoyant of any economy from its depressed state largely depends on efficient transfer of funds from saves to capital needing firm and individual the essence of capital in relation to the long fun growth and business prosperity in both government and private organization cannot be over emphasized since it provide the funds needed to acquire fixed assets and implement programs aimed at insuring the acquisition existence the study will therefore touch some pertinent economic and social at the role capital market in Nigeria economic development will also help to reveal the importance of exchange as a vehicle of economic development through mobilization and channelization of funds role and saving for productive investment SCOPE These studies focus on primary information from Nigerian stock

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