CHAPTER ONE
INTRODUCTION
1.1 BACKGROUD OF THE STUDY
Every economy seeks to appropriate industrial base to move the economy from a traditional and low level of production to a more automated and efficient system of mass processing and the manufacturing of goods and services. For this level of development to be attained, there must be a sound financial system which would serve as the back bone of such an economy. If this is pursued, acquiring industrial capabilities would be easily attained since it is considered as the economic development. As a result of the importance of the financial system in developing industrial capabilities every economy seeks avenues to acquire them one of such avenues is raising funds through the capital market.
The capital market deals with instrument or long term securities with maturity period longer than one year such as bonds, debentures and equity stocks. The capital market in Nigeria has been a major source of finance to the government; industries etc. to meet their longer term capital requirements such as financing for fixed investments on buildings, plants bridges etc. The use of capital market reduces over reliance on the money market, assist in promoting a solvent and competitive financial sector as well as fostering a healthy stock market culture. The importance of the capital market cannot be under estimated.it is the fundamental instrument of capital formation in any countries economy since no instrument takes place in a vacuum. A well-developed capital market ensures the availability of capital funds for investment and developing project usually takes a long gestation period which the funds from the money market cannot sustain. This implies that the absence of an efficient capital market in an economy would result in shortage of long term funds and would harm investment and hence militates against economic development.
An active capital market aids the mobilization of savings for economic growth and development. encourages the efficient allocation of resources through changes in wealth ownership and composition, catalyzes the creation of a healthy private sector, and facilitates the promotion of rapid capital formation (Iyoha 2004).Nigeria has a growing capital market, which has since its inception served as a veritable source of long term funds to finance investment. Some of the reasons for promoting an active capital market in Nigeria include
Mobilization of savings for economic growth and development.
Encouragement of efficient allocation of resources through in changes wealth ownership and composition.
Creation of a healthy private sector and promotion of rapid capital formation.
The capital market functions through the stock exchange, a stock exchange is a market, which facilitated buying, and selling of shares, stocks, bonds, securities and debentures (Thingon, 2001). The stock exchange is not just a financial institution, but also the very hub that pivots around which every activities of the capital market revolve. It is not only crucial, but also central to the entire capital mobilization processes. „Anao‟ “ND” posits that it is an economic institution, which sees to the efficient allocation of available capital funds, to diverse uses in the economy.