THE IMPACT OF GLOBAL FINANCIAL CRISIS ON NIGERIAN CAPITAL MARKET

ABSTRACT

This study was an attempt to look at the impact of global financial crisis on Nigerian capital market. The population sample consists of people in different level of age and education in Lagos State.

The sample of thirty (30) people was picked, which emerged from non- probability sampling techniques. The researcher employed the use of questionnaire to generate adequate information. The data collected were analyzed using chi-square statistical method.

Moreover, it was also revealed that:

1.       Adequate control will ensure that the global financial crisis are decline on Nigerian capital market

ii.       Adequate control is a means of identifying variance between global financial crisis and Nigerian capital market.

TABLE OF CONTENTS

                                                                                      Pages

Title Page

Certification

Dedication

Acknowledgement

Abstract

Table of Contents

CHAPTER ONE

INTRODUCTION

1.1            Background to the study

1.2            Statement of Problem

1.3            Objectives of Study

1.4            Research Question

1.5            Statement of Hypothesis

1.6            Method and procedure

1.7            Significance of the Study

1.8            Limitation and delimitation

1.9            Definitions of Terms

CHAPTER TWO

LITERATURE REVIEW

2.1     Introduction  

2.2     The implication of global financial crisis on Nigerian economy

2.3     Causes of the Crisis

2.4     Effects of global financial crisis

2.5     Nigerian Foreign Reserve

2.6     The Role of Nigerian banks

2.7     Conclusion

CHAPTER THREE

RESEARCH METHODOLOGY

3.0     Introduction

3.1     Source of data

3.2     Procedure for analysis of data

3.3     Questionnaire and Assumption

3.4     Analysis of research techniques

3.5     Sampling Size

3.6     Validity Test

3.7     Level of Significance

CHAPTER FOUR

DATA PRESENTATION ANALYSIS AND INTERPRETATION

4.1     Introduction

4.2     Data Analysis and Interpretation

4.3     Presentation and Analysis of Data According to hypothesis

4.4     Analysis of other data and interpretation

4.5     Decision Rule

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1     Introduction

5.2     Summary

5.3     Conclusion

5.4     Recommendations

Bibliography

Questionnaire

CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY

The current global financial crisis has been described by many economists as a great challenge to the world economy. They are of the opinion that the current crisis is largely different from past crisis, which are usually region- based. As a result of the current financial turmoil which is rapidly spreading across continent, concerned parties such as economist, financial analysts have been pointing to the need to take serious action to shore up faltering economics and restore confidence in the global economy.

The reason for this crisis are varied and complex. The crisis can be attributed to a number of factors pervasive in both the housing and credit market, which was developed over an extended period of time.

There are many different views of the causes including the inability of homeowners to make their mortgage payments, poor judgment by the borrowers and/ or the lender speculations and overbuilding during the boom period, risky mortgage products, high personal and corporate debt level, complex financial innovations that distributed perhaps concealed default risks, central bank policies and government regulation. The significant decline in housing price led to delinquencies in mortgage payment and foreclosure which caused ripple effect across the financial market and global banking systems, as investment related to housing prices declined significantly in value, placing the health of key financial institution and government sponsored enterprises at risk.

Reputable organization in the united states such as Done Jones have been witnessing a cyclical bear market since July 2, 2008 coupled with series of panics related to financial instability cause by the failure and / or sub primary mortgage lending difficulty of the investment banking industry.

It is however noteworthy that this wild financial periods is not confined to the United States. According to a time magazine essay, the global stock market lost a whopping $6.5 trillion as measure by standard and poor's BMI global (an index of major markets worldwide) on October 6 and 7 2008 alone, the world has become global village sewn together through telecommunication and technological advancement. Financial product particularly mortgage backed on securities (MBS) are traded across borders on line, hence on global financial market.

This is a clear indication that the global economy is inter­related; hence, what effect one country directly or indirectly affects the others.

The economy of Nigeria, as a developing country largely depends on the economics of various foreign developed countries that are being plagued by the current global financial crisis.

1.2    STATEMENT OF THE PROBLEM

Nigeria is facing the problem of uncertain economic situation both in the near and future as a result of the ongoing global and domestic financial crisis.

However, government problems of financial crisis capital market can be overcome if crucial measures are taken.

Firstly, there is an essential need to handle the issue diversification of the economy to ensure that the country gets enough funds for development.

Secondly, the government has also been advised to exercise control over how the proceed of petroleum profit tax is channeled in order to promote economic growth.

1.3    OBJECTIVE OF THE STUDY

The purpose of this study is to access the impact of global financial crisis on capital market in Nigerian economic and for government both executive end the national legislative as well as the Nigerian Stock Exchange (NSE), the Securities and Exchange Commission (SEC), the Nigeria Deposit Insurance Corporation (NDIC) and Central Bank of Nigerian (CBN) should all coordinate their activities and rise to the occasion that has been attempted by various government around the world.

1.4    RESEARCH QUESTIONS

i.       Is there any relationship between the effect of global financial crises and capital market in Nigerian economy?

ii.      What are the effect of global financial crises and capital market in Nigeria economy?

1.5    STATEMENT OF HYPOTHESIS

Hi:    There is relationship between the effect of global financial crises and capital market in Nigerian economy.

HO:   There is no relationship between the effect of global financial crises and capital market in Nigerian economy.

The relevant conclusions are drawn on the basis of acceptance or rejection of the hypothesis.

Hi:    Alternative hypothesis

HO:   Null hypothesis

1.6    METHODS AND PROCEDURES

For this study, both primary and secondary data will collected.

Primary data will be collected by means of self­-administered questionnaire and face - to - face interview.

While secondary data will be collected from relevant text book, annual report, account, journals, the stock exchange report, business time/ guardian paper, presented at seminal and conferences.

1.7   SIGNIFICANCE OF THE STUDY

This study significant for the following reasons. To identify Nigerian economy as a system which operates within, and environment that is greatly influence by other actors is the broader system (global economy), it is imperative to consider how the global economic turmoil would affect our economy. Since the commencement of the current global financial crisis, fear has been expressed on its likely implication to Nigerian bank in particular and economy at large. Without prejudice to the assurance given by those who should know that the Nigerian economy is immune to the global financial crisis. There is the need to look at the wider implication of the economic crises ravaging developed economies in the United State, Europe and Asia.

1.8   LIMITATION AND DELIMITATION

In any part of the world, national economy depend on one another for survival and as such no economy can be insulted form what is going on from the rest of the world. In reality, the global financial crisis has damaged global economics by reducing demand for goods and services and growth but societies that are properly governed are expected to experience limited impact of the crisis. Already, government is soliciting support from bodies such as CBN, SEC, NSE and these bodies are embarking on proactive measure to ensure that operators in the nation capital market have access to credit facilities. The central bank of Nigeria has expanded the discount window and reduced cash reserve ratio for 40% to 30% to ensure increased lending and aid liquidity.

1.9    DEFINITION OF THE TERM

Capital market: Capital markets exist to allocate surplus fund efficiently for capital information in the economy.

Economic: Contemporary economic literature has shown that history is yet to identify a discipline that is as challenging as economies. It is perhaps the most dynamic, interesting and embracing field of human endeavor.

Globalization: Refers to shift toward more integrated and interdependent world economy. Globalization has several facets including the globalization of market and the globalization of production.

Globalization of market: Refers to the emerging of historical instinct and separate market into one huge global market place.

Crisis: In the foregoing concept of crisis is highly relevant here, for it dialectically constitute what the Chinese called Weiji that is, the problems and the solution, if and only if the lesson provided by the problem are assiduously learnt and applied.