AN APPRAISAL OF THE EFFECTIVENESS OF GLOBALIZATION ON THE NIGERIA CAPITAL MARKET (A CASE STUDY OF THE LAGOS STOCK EXCHANGE)
TABLE OF CONTENT
Title page i
Table of content vi
1.1 Background of the Study
1.2 Stock Market Regulation
1.3 Statement of the Problem
1.4 Research of the Problem
1.5 Hypothesis of the Study
1.6 Objectives of the Study
1.7 Justification of the Study
1.8 Scope of the Study
1.9 Definitions of the Terms
2.1 The Concert of Globalization
2.2 The Nigeria Capital Market
2.3.0 The Structure of the Nigeria Capital Market
2.3.1 The Primary Market
2.3.2 The Secondary Market
2.4 Capital Market as a Vehicle of Development
2.5.0 Financing Options in the Nigeria Capital Market
2.5.1 Advantages and Disadvantages of Capital Market
2.6 Role of the Stock Exchange in the Nigeria Economy
2.7 Process of Globalization
2.8 Evolution of Globalization
2.9 Globalization of Financial Market
2.10 International Portfolio Diversification
2.11 Portfolio Equity Flows
2.12 Impact of Globalization and Formation
2.13 Nigeria in the Capital Economy
3.1 Historical Background of the Lagos Stock Exchange
3.2 Types and Sources of Data
3.2.1 Variable to be Measured
3.2.2 Model and its Assumption
3.3 Data Analysis Technique
Data Presentation, Analysis and Interpretation
4.2 Descriptions of Data
4.3 Presentations of Data
4.4 Test of Hypothesis
4.5 Summary of Relevant Result for Testing the Hypothesis
4.6 Interpretation of Analysis
Summary, Conclusion and Recommendation
5.1 Summary of Findings
1.1 BACKGROUND OF THE STUDY
It may not be wrong to say that the world as a community is increasing getting smaller, and the world business environment I arguably influenced by this trend.
Recently, the activities and transactions on Nigeria capital market were mainly dominant by various forms of restrictive regulation. Though the banking and security agents are both financial institutions but they have different regulatory authorities.
The Nigeria capital market is one of the places for the long term found. It uses instruments like bound, mortgages, term loan, stocks, ordinary and preference share and debentures for its operation (Olowe, 1998). The capital market is an important place in most economy of the world. A highly developed business enterprise economy.
The Nigeria capital market as a formal institution came into existence in 1961 with the ester price economy.
The Nigeria capital market as a formal institution came into existence in 1961 with establishment of the Lagos stock exchange (LSE). The Lagos stock exchange becomes Nigeria stock exchange (NSE) in 1977. Today, the Nigeria stock exchange has many functional trading floors in different part of the country.
Other major institutions that make up the Nigeria capital market include the Securities and Exchange Commission (SEC), which is the regulatory constitution.
In the capital market, issuing houses and brokerage houses shares registrars and unit trust.
The capital market is divided into two:
a. The primary market
b. The secondary market
Other market operation includes stock brokers, dealers, investors, investment advances, bank and the registrars.
The establishment of Nigeria capital market and other market operators is as a result of obvious areas of globalization that Nigeria cannot afford to be left behind. Globalization penalizes economies that adopt obnoxious macro economics and sectional policies, while it enhances the growth potentials of those that apply sound policies.
Globalization is the rapid integration of trade relations productive and investment decision across the globe by economic agents who employ and more investment capital and technology around to take advantages of environment where their competitive edge can manifest in high retune (Regumamu 1999).
Lubbers (1997) defines globalization as a process in which geographic distance become factors of diminishing distance become factors of diminishing importance and the establishment and maintenance of across border economic political and socio-cultural relations. The process has reduced the world economy to a global village. The phenomenon has been achieved primarily by a world wide wave of liberalization that is the tariff and non-tariff barriers to international trade, encouragement of foreign investment and the deregulation of interest rate and the successful transaction of the stock exchange from the manual call over trading system on April 27 1997. Both the level of foreign ownership in Nigeria companies and flow of foreign capital are now restricted. One of the culminations of these effort was the first foreign list on the Johannes bury stork exchange. It was the first a bank through on internationalization of the stock market, while enhancing opportunities for portfolio diversification by domestic investors.
Another significant development of the stock exchange was the linking up the rented electronic contributor system (R.E.C.S) for the online disseminations of the stock market information trading statistic and all share index and company investment (Nigeria Stock Exchange N.S.C 2000).
However, the Nigeria stock exchange has established an internet system called CAPNET which enable investors to have direct access information on the nation stoke market. CAPNET collect and stores information on daily trading activities, stock market statistics as well as corporate information on various securities quoted on the exchange, which could be accessed by all subscribers. The website permit brokers and investors to monitor the marketed on real time bases enables investors decisions markers to enter global from remote location any where in the world. Thus will enable the stock holders of the exchange to add value to the different decision they make in their respective capacities such as quoted companies. Stockbrokers, issuing houses investors and capital market operation due to the timely availability of information about the stock exchange (NSE 2000)
1.2 STOCK MARKET REGULATION
Transaction in stock market are guided by the following legislation among others are :-
Investment and security Decree (NO.45) 1995 companies and Allied matter Acct 1990 as amended foreign exchange (miscellaneous provision) Decree 1995 Nigeria investment promotion commission Decree 1995
1.3 STATEMENT OF THE PROBLEM
Despite the benefits accrue to an economy that participate effectively on globalization, unhealthy they complication could also arise.
Some people would think that the benefit of globalization favour certain regions of the world especially those that are already established in the international trade market, not knowledge that policies made to promote economics with globalization could be unbeneficial such policies are not sound or properly carried out.
Due to this, the various policies employed from time to time to shift the economy have not been able in good measure contributes to the economic development.
1.4 RESEARCH QUESTION
The following questions are relevant and for which solutions are preferred in the course of the research study, they include
1. Does globalization affect developing and industrialized countries in different way?
2. What are the effects, relevance and susceptibility of globalization on the Lagos stock Exchange?
3. What is the relationship between the stock market performance and gross? Domestic product (G.O.P) Nigeria?
4. Is the Nigeria capital market and the Nigeria economy at large comfortable with the increase in capital flow that arise as a result of globalization.
1.5 HYPOTHESIS OF THE STUDY
The hypothesis to be textual in this research study include
Ho: Stock market performance has a significant positive impact on Nigeria is God
Ho: Stock market performance as measured by price earning ration in other emerging market does not have a significant positive relationship with the stock market performance to Nigeria
H1: Stock market performance as measured by price earning rates in other emerging market has a significant relationship with the stock market performance in Nigeria.
1.6 OBJECTIVES OF THE STUDY
The objectives of the study can be divided into two:
A. primary objectives which are to,
i. Examine the effect of globalization on the activities of the Nigeria stock exchange market
ii. Review the effect or impact of globalization on the unawareness of investor as opportunities of the stock exchange.
B. Secondary objectives which are to :
i. examine the roles of stock exchange market and
ii. Profit recommendation for the development or growth of the Nigeria capital market
1.7 JUSTIFICATION OF THE STUDY
In modern business free market economic may be beneficial to parti0cipates who are able to complete for scarce resources.
On the other hand, the qualitative contribution of this study may aid in the Nigeria capital market. The list has to explore all avenues through which it can create a niches for itself in the global capital market environment or be left behind to its detriment and under development.
In addition, Nigeria economy in the form of balance of payment rising commodities prices e.t.c foreign in economy. The role of Nigeria capital market in attracting and utilizing foreign investment in the Nigeria economy have accessed because it is crucial to the economy.
The knowledge derived from this study will be of great importance in ascertaining the performance of Nigeria capital market during a particular period as compared to the performance of other related capital market in the world and this will be of great importance for future research.
1.8 SCOPE OF THE STUDY
This research study covers various topic relating to the study such as the historical background of the Lagos stock exchange, stock market regulation and regulation of the Lagos stock exchange which is used as the case study for the research study. And to some extent, the capital countries are also examined.
The effect of globalization and what extent on the Lagos stock exchange market is examined and what benefits the Nigeria capital market has derived from globalization is also examined.
1.9 DEFINITION OF TERMS
LIBERALIZATION: the lowering of tariff and non-tariff barriers to international trade (Solink 2000)
GLOBALIZATION:- it is a process involves creating new strains in the global tracking environment which is the result of effect of the shifting of autonomous economies into a global market or system of production and distribution. (Kwanshie 1998)
CAPITAL MARKET:- it is a place for long term fund it uses instrument is like bonds, mortgages, term loan stock, ordinary and preference share and debentures.
RENTER ELECTRONIC CONTRIBUTION (R.E.C.S) an electronic device for online dissemination of stock market information, trade, statistics and all share index and company investment (NSE, 2000)
STOCK BROKERS:- Someone whose job is to buy and sell securities on behalf of the investing public. He is a stock exchange agent (Olowe 1998)
SECURITY:- An investment in a company or in government debt which can be traded on the financial market and which produces an income for the investors. It include bonds and share which give interest and dividend respectively (NSE2000)
CONGLOMERATE:- an industrial group made up of companies often have diverse and unrelated interest (NSE2000)
CAPITAL ACCOUNT:- Records of international movement of capital which is reflected changes of financial assets and liabilities. (Okereke Onyiake 2001)
PRIVATIZATION:- The transfer of public enterprise by government to the private which makes the enterprise a profit making one.
EQUITY:- Shareholding that carries no right to participation beyond a specified amount in a distribution.
2.1 THE CONCEPT OF GLOBALIZATION
Globalization is a process of integrating economic decision making such as consumption investment and saving process all over the world.
Kwaraslies (1998) stated globalization as a process which involves creating new strains in the global tracking environment which is the result of effect of the offing of autonomous economies into global market or system of production and distribution. Despite the strains positive development including the provision of an increase or expansion of the world trade and increase national economic growth for countries in the positives benefits.
There are miscomputation in some quarters that the process known as globalization would eventually result in bondless world that increase interloped relationship does not automatically eliminate the existence of nation states from the economic perspective, it does not even requires harmonization or integration of social and political system..