The Nigerian Stock Market and Its Impact on the Economy

African history is extremely important because it contributes to the overall understanding of world history. The historical interaction between Africa and America created a platform for national capitalization. Nigeria is one of the most populated countries in Africa and more specifically it consists of one of the highest amounts of ethnics groups. Nigeria consists of over three hundred different ethnic groups. Language, culture, and values are what differentiate ethnic groups from each other.

Raw Materials Unavailability: Raw materials are less available or unavailable. It may be gathered from distance sources that incur high expenses. Poor infrastructure for production of product & services: Due to undeveloped mode of every sector , Production infrastructure is not suitable. Markets are not available: Market for products are not available. People want low cost product because they have less sources of income. Customers are less available for good products: High quality products are costly. They are not beared by customers because their purchasing power is low. More dependent families: Less people earn and more people want to consume. It means more people are dependent upon income generating members. Lands are not suitable for agriculture: Lands are mostly barren due to poor irrigation system, mismanagement of water, unavailability of modern agriculture methods application and tools, etc. People depend upon still upon ancient irrigation system. Cheap labors are available: Labors are easily available at low costs but they are mostly unskilled. So they are useless in technical works or in high rated projects.

The purpose of this study is to empirically re-examine the effect of government spending on the economic growth in Nigeria. Rising government expenditure has not translated to meaningful growth and development, as Nigeria ranks among the poorest countries in the world. In addition, many Nigerians have continued to wallow in abject poverty, while more than 50 percent live on less than US$2 per day. Couple with this, is dilapidated infrastructure (especially roads and power supply) that has led to the collapse of many industries, including high level of unemployment.

The Capital market in any country is one of the major pillars of long-term economic growth and development. The market serves a broad range of clientele, including different levels of government, corporate bodies and individuals within and outside the country. Capital formation entails accumulated savings out of the current incomes of either organization or individual. It is investment in fixed assets which in part is financed with monies raised through the capital market (Al-Faki, 2006). The Capital market has been one of the major means through which foreign funds are injected into most economies and the tendency towards a global economy is more visible there than anywhere else. It is therefore, quite valid to state that the growth of the capital market has become one of the barometers for measuring the overall economic growth of a nation (Emenuga, 1998).

The specific issues being studied are all linked to economic growth and financial development. The authors use a certain method to help them in their research. “After considering the panel characteristics of the dataset, long-run relationships among financial development, economic growth and

As cited in Mohammad Mahmudul Alam, Ologunde, Elumilade, and Asaolu (2006) mentioned that a country will prosper in long run, only if its stock market in a better financial position.

Jefrey Sachs shows that there is a relationship between economic activity, savings, capital investment and increased economic activity. Households use the income for the purpose of consumption, savings and taxes. The government uses tax revenues to current expenditures and development expenditures. Economic capital is produced by household savings and government investments. Higher capital formation leads to economic growth, which in turn increases income households through the impact of income growth.

Before proceeding it is crucial to define the term “capital”. According to the Merriam Webster Dictionary, it is “invested savings used in the process of production, or money used to bring in income.” Investors around the world hold various assets to earn economic returns. The funds they loan out finance growth and development of economies abroad. It is their hope that they correctly allocate their wealth so that they can profit from sound investment. Emerging economies, nascent industries, etc. hope that they receive adequate funding to facilitate their development. Without it, they would stagnate and collapse. Capital is the lifeblood of an economy; its significance to economic growth cannot be overestimated or overstated.

Schumpeter (1934) points that finance have many functions which are significant in economic growth and other areas development, for example, risk management, project evaluation, saving increase. The connection between the operation of the financial sector and economic growth has been one of the most heavily researched topics in development economics. There are convincing arguments that financial sector development plays a pivotal role in facilitating economic growth. In the period of mercantilism, mercantilists think that currency is the treasure, therefore the increase of currency is equal to the economic growth. In 1912 joseph alois schumpeter, a highly acclaimed economist, published a book entitled the theory of economic development that assessed that the impact of financial variables, for instance currency, interests, credit and loan,

Probably 90 percent of its population relied on the small village economy, also unchanged for centuries. Political independence provided the drive, and oil the financial means to modernize. Even now the average annual per capita l income of about $500 is unevenly distributed, with many village people being very poor.

Well-functioning markets promote economic growth. Economies with well-developed markets perform better than economies with poorly-functioning markets. Each organization needs capital to function and this enables economy growth.

The Nigerian economy before independence in 1960 was predominantly an agricultural economy. With a geographical land mass of about 923,768sqkm, Nigeria is located along the Atlantic coast line. The location of natural resources in almost every part of the country has attracted trade domestically and internationally.

Nigeria 's economy is characterized by vast rural-based conventional sector with almost 70% of the assemblage lives on agriculture guiding to legal felling, infringements by farmers and cattle herders, firewood collectors and illicit procurement of shielded wildlife. Fast growth and high measure of poorness (Omonoma, 2009), has led to burden on water, land and other natural resources. while many of the local communities live on the wild species biodiversity (Northerner Governing of Nigeria). Mismanagement and over exploitation of these natural resources has led to degradation of natural forest, loss of ground fertility, water, environmental abjection, extinction of biodiversity,

The Research and Market Development of Security and Exchange Commission (SEC) of Nigeria, elaborated the roles of Nigerian Capital Market and market activities in the Nigerian financial sector stability (Adekunle, 2010: 8): The importance of the capital market as a barometer of economic performance can be inferred from daily news reporting. Media organizations report daily the performance of the capital market aggregates (especially the stock market index) and individual stocks. The reporting of the performance of different markets across the globe indicates the relative competitive competitiveness of the underlying economies and stocks. This becomes even more interesting when a particular stock is dual – listed. It provides opportunities for companies to borrow funds needed for long-term investment purposes and provide avenues for the marketing of shares and other securities in order to raise fresh funds for expansion of operations, leading to increase in output/productivity. In addition,

The idea of existence of correlation between financial development and economic growth was developed at the beginning of the last century (Schumpeter, 1912). It implies that well developed financial sector is able to enhance productivity and drive economy through making rational investment decisions and funding entrepreneurial innovative activities.