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1.1 Background of the Study
 It is a known fact that the investment that promotes economic growth and development requires long term funding, far longer than the duration for which most savers are willing to commit their funds (Ologunde, 2006). The financial system comprises financial institutions, instruments and markets that provide an effective payment and credit system that facilitate the channeling of funds from the lenders to the borrowers of the economy. The principal role played by the financial system in any country is to provide the infrastructure needed to allow surplus resources to be allocated to those individuals and companies with deficits. It is generally noted in the development literature that domestic capital formation is the driving force behind any country’ s development and effective domestic financial institutions are one of its most important facilitators. They are the key channels between savings and investments and their efficiency is a key determinant of a country’s economic growth (Sengupta, 1991). The experiences of the advanced industrial world further illustrate the idea that financial market development makes fundamental contribution to economic growth by facilitating the efficient mobilization of capital for large investments. In these countries the financial market extends well beyond traditional banking institutions to include insurance companies, stock markets, mutual funds and other financial service providers. These none – bank financial institutions (NBFIs) which provide services that are not necessarily suited to banks, serve as competition to banks and specialize in sectors and groups. According to Carmichael (2005) “having a multifaceted financial system which includes non- banking institutions can protect economies from financial shocks”. They provide a back up support to the dominance of the banking system. Banks being highly leveraged institutions have throughout their history, periodically fallen into crises, where there is no back up, they tended to pull their economies down with them. However in many developing countries like Nigeria, the financial market is often dominated by banks. It is also well known that commercial banks tend to concentrate on short – term lending (or the short term end of the financial markets) rather than lending for long – gestation projects that are critical to rapid economic growth and development. It is therefore important that resources are made available for financing long – term development (through debt and equity) by providing additional channel for long –term savings. It is in this context that the development of non –bank financial institutions that deal mainly in the capital market becomes imperative. Their growth and contribution hold the promise of a broad and balanced financial sector that spreads risks. This study aims to investigate the role of one such non – bank financial institutions that is, the Stock Market in the financial intermediation process in Nigeria. The Stock Market, as a concept for the mechanism that enables the trading of company’s stocks and other securities, fall within the purview of the capital market and given the consolidation process that is taking place currently, it will no doubt increase complexity of the emerging institutions as well as create new challenges to regulators entrusted with safeguarding the safety and soundness of the financial system. Furthermore, Nigeria as an emerging market must endeavour to build strong financial institutions that operate successfully in a climate of rapid changes. Specialized capital market segment like the Stock Market holds the potential of furthering the objective by providing sharper professional skills in selected areas while giving healthy competition to banks. The Stock Exchange, being an important component of the Stock Market that specializes in the business of bringing buyers and sellers of stocks and other securities together, plays a significant role in the capital formation process because of the tremendous opportunities that ensure from its activities. The Stock Exchange is expected to mobilize long – term savings to finance long – term investments by providing risk capital in the form of equity and/ or quasi – equity to entrepreneurs. The Stock Exchange is really not just a financial institution or market, but the very hub of the capital market, the pivot around which every activity of the capital market revolves. Hence the stock exchange is said to encourage broader ownership of productive assets and enhance the efficiency of the capital market through a competitive pricing mechanism. For a number of reasons developed stock markets are important for promoting the efficiency of investment and enhance economic growth: Firstly, well functioning stock market generates lower cost of equity capital for investors. Stock exchange acts as a clearing house for each transaction, meaning that exchange collects and delivers shares (stock) and guarantees the payment to the sellers of securities. This eliminates the risk of default on transaction to individual buyer or seller. Secondly, continuous adjustment of share prices in a developed stock market imposes control on the investment behaviour of firms. History has shown that prices of shares and other assets are important aspects of the dynamics of economic activity, and can influence or be an indicator of social mood. Rising share prices for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption pattern. Thirdly, in a developed stock market, investors have the opportunity to price and hedge against risk effectively. The liquidity that an exchange provides affords investors the ability to quickly and easily sell (trade) securities. Finally, stock market serves as a mechanism for attracting foreign portfolio investment, thereby increasing resources available to the economy for investment and economic development. The stock market aids the mobilization of capital for pursuing economic expansion, thereby creating goods and services for the satisfaction and the well being of the general citizenry. The Nigerian Stock Exchange can be said to have existed long enough for a critical evaluation of its performance and contribution to economic growth. The thrust of this study is to empirically investigate the impact of stock market performance on economic growth in Nigeria, using data for 1984-2012 periods. A study of this nature is crucial because stock market is an important component of capital market, which is widely believed to be the engine of economic growth in any modern economy. Knowing the major role (activity) and the contribution of the nation’s stock market to the economy will assist policy makers and regulators to identify the felt needs, thereby facilitating the design of demand- driven policies to ensure a well developed stock market and hence accelerate the rate of economic growth

Project detailsContents
Number of Pages80 pages
Chapter one Introduction
Chapter two Literature review
Chapter three  methodology
Chapter  four  Data analysis
Chapter  five Summary,discussion & recommendations
Chapter summary1 to 5 chapters
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