CHAPTER ONE INTRODUCTION 1.1 The Background of the Study
Currently, Nigeria is tagged a developing nation even though she is blessed with numerous natural resources. The problem of Nigeria can be resolved if resources are properly mobilized, resulting in efficiency in all sectors and aid proper development. As the case is today in Nigeria, various sectors remain undeveloped, and for economic progress there must be development in various sectors of the economy, including the capital market.
The development of the capital market, and apparently the stock market, provides opportunities for greater funds mobilization, improved efficiency in resource allocation and provision of relevant information for appraisal (Inanga and Emenuga, 1997). Stock market promotes efficiency in capital information and allocation. It enables individuals and government to finance new projects which are capable of increasing productive capacity of a nation (Ohiomu and Enabulu, 2011). Adamopoulos (2009) stock market has contributed to the mobilization of domestic savings by enhancing the set of financial instrument available to savers to diversify their portfolios and provide an important source of investment capital at a reduced cost. The role of stock market has been very significant. According to Mala and White (2006) stock market is an important component of any financial sector of any economy. It is viewed as a complex institution imbued with inherent mechanism through which long-term funds of the major sectors of the economy such as households, firms, and government are mobilized, harnessed and made available to various sectors of the economy (Nyong, 1997). The stock market plays an intermediation function. Riman, Esso and Eyo (2008) provide evidence of the relationship between stock market development and economic growth. Large, liquid and efficient capital market can ease savings mobilization and by mobilizing savings, capital markets enlarge the set of feasible investments projects. Since worthy projects require large capital injection and some enjoy economies of scale, capital markets that ease resource mobilization can boost economic efficiency and accelerate long run economic growth (Idowu and Babatunde, 2011).