STOCK MARKET CAPITALIZATION AND FINANCIAL OPENNESS IN NIGERIA ECONOMY (2000 – 2013)

ABSTRACT

The purpose of the study is to determine the effect of stock market capitalization and financial openness in Nigerian economy. The descriptive research design was adopted in this study. Data were collected from secondary sources within the year 2000 – 2013, the sampling technique used was probability sampling techniques and, the correlation and regression method of analysis were used to test the relevant hypothesis. The findings revealed that Market Capitalization has significant relationship with Gross Domestic Product; also that financial openness has significant relationship with total asset, market capitalization and All Share Index. It was concluded that, the relationship signifies a vibrant economy open for huge investment in the stock market and investors are offered a greater opportunity for diversification. Also the market has the capacity to create wealth and provide long term capital needed for development. It was therefore recommended that, since Nigeria Stock exchange is highly volatile and since prospective investor relies on information that is concise, comprehensive, timely and not misleading. Continuation of intensive regulation should ensure timely release of information so as to lessen the capitalization effects of the market.

CHAPTER ONE

1.0 BACKGROUND OF STUDY

1.1         STATEMENT OF THE PROBLEM

Obiechina and Ukeje (2013) stated that the pursuit of economic growth has been at the front burner of economic policy of most developing countries. This however id often hindered by the non availability of resources that would drive the process of achieving the required economic growth.

Before the middle of 1980’s Nigeria did not record any figure on portfolio investment (inflow or outflow) in hen balance of payment (BOP) accounts. This was attributable to the non-internationalization on the portfolio investment of Nigeria investors in foreign capital/money market. Against this backdrop, the statement of research problem includes the following:

1. Under development of the Nigeria economy as associated by little or no foreign direct investment into the country.
2. Under development of the Nigeria market cum unsophisticated mode of operation.
3. Trade imbalance vise vice low level capital inflow into Nigeria economy.

In reality Mona, Jannus, Casimo et al (2012) observed that as trade integration deepens economies are naturally more exposed to external shocks.

1.2         OBJECTIVES OF THE STUDY

The central objective of this research work is to measure stock market capitalization and financial openness in Nigeria economy.

Stock market capitalization/return is better measured quantitatively using market capitalization in this regarded, the research objectives becomes the following:

1. To measure the impact of stock market return/market capitalization on the gross domestic product (HDP) of Nigeria.
2. To ascertain if financial openness has a direct link with total assets
3. To assess the relevance of stock market capitalization and financial openness on all share index.

1.3         RESEARCH QUESTIONS.

1. Would stock market returns/capitalization and financial openness impact on the gross domestic product (GDP) of Nigeria?
2. Can financial openness help to improve all share index in Nigeria?
3. To what extend would stock market capitalization and financial openness impact on total asset of the economy.

Ho1:   There is no significant relationship between stock market vitality/market capitalization and the gross domestic product (GDP) of Nigerian economy.

Ho2:   There is no significant relationship between financial openness and stock market capitalization and all share index.

1.4         SCOPE OF THE STUDY

The study examined stock market capitalization/market capitalization and financial openness in Nigerian economy. The rationale behind decision is anchored on challenges which include under-development of Nigerian capital market. The research objectives amongst other include measurement of the impact of stock market return/market capitalization on the gross domestic product (GDP) of Nigeria.

The time coverage of the study is 2000 – 2012, while variable were sourced from CBN and SEC statistical bulletins. Findings of this study better explain the relevance of stock market capitalization/market capitalization and financial openness to the Nigerian capital market development as well as the economy in general.

1.5         SIGNIFICANT OF THE STUDY.

1. Capital market regulation, example stock exchange commission (SEC), stock exchange in the stock market.
2. Capital market operator. E.g the investment house, stock broker etc.
3. Further research e.g student and usage, it is for research purpose
4. General public e.g group of persons, industries, firms, etc. they use it for the purpose of creative awareness about the happening in stock market.
5. The academia e.g scholar’s professors, etc. they use it for the improvement of knowledge.

1.6         LIMITATION OF THE STUDY

Completing the research work was a difficult task as the researcher was faced by a number of challenges.

1. The issue of finance was huge hindrances during the course of the research as it will determine the person and place to be visited.
2. The research faced the limitation of time as the study was meant to be completed within a time frame.
3. Inadequate material in the library
4. Difficulty in extracting data on stock market capitalization and financial openness.