Financial Sector Liberalization And Capital Market Development In Nigeria
Abstract
This exploration study was carried out to find the link between fiscal sector liberalization and capital request Development. As part of the Structural Adjustment Programme( SAP) of 1986, the Nigerian Government initiated a large scale restructuring
Of the fiscal sector and the liberalization of the regulations concerning fiscal institutions and requests. This was justified on the base of being request failures which
arose from externalities and lack of information
Using the econometric ways, we set up, that fiscal liberalization increased the real deposit rate and also will lead to a negotiation into fiscal asset performing in a lesser force credit to finance real investment for capital request development and profitable growth. Accordingly, we recommend that for macroeconomic stability, effectiveness and proper development of the fiscal system, direct control should be discouraged while circular control should be encouraged through the request medium.
Chapter One
Preface
Background To The Study
Just like other African husbandry, Nigeria’s fiscal sector is underdeveloped and unorganized. It’s characterized by dualism, request segmentation and spatial fragmentation( Iyoha, 2002). fiscal sector facilitates the conduct of trade deals, the effective use of fiscal coffers, rallying of savings and threat taking which are central to sustained profitable Growth and Development.
According toT.W. Oshikoya and Osita Ogbu( 1995), fiscal liberalization in several African countries has been enforced largely through Structural Adjustment Programs. In Nigeria, until the relinquishment of structural adaptation program in 1986, fiscal suppression and regulatory control of interest rates were the order of the day.
Economic Development creates demands for particular types of fiscal arrangements and the fiscal system responds automatically to these demands. Finance, is argued to act as a catalyst in the process of Development but if repressed could come fetters or obstacles to the Growth process( Ikhide, 1997).
Indeed though the plutocrat and capital requests in Nigeria aren’t as deep as desirable, a launch seems to have been made in the late 1980s and early 1990s to develop a more robust and balanced fiscal structure that would ameliorate the capability of the domestic fiscal system to rally savings and contribute to tone sustained Economic Growth( Iyoha, 2002).
The objects of the liberalization are to make more effective, robust and deeper fiscal systems, which can support the growth of private sector enterprise. effectiveness entails two factors; which are bettered credit allocation and more or higher quality fiscal services for a given position of inputs( Brown Bridge and Gayi, 2001).
The part played by the fiscal sector is an Frugality can be important in determining profitable Growth. A growing empirical literature demonstrates that the Development of the fiscal system has positive goods on the long run rate of Economic Growth and the volume and effectiveness of investment( Fry, 1995 Philip Arestis et al, 2002), through the junking of the rudiments of fiscal suppression, particularly controlled interest rates, fiscal sector liberalization is anticipated to lead to advanced nominal and real interest rate( Emenuga, 2001).
The capital request is divided into two parts the primary request where companies ’ shares are issued for the first time before being quoted on the stock exchange and secondary request where is trading is done in being stocks. The capital request has served as a source of long- term fund to finance investment in the private sector of the Nigerian Frugality.
The liberalization of the fiscal sector involved liberalization of interest rates, creation of request grounded system of credit allocation and enhancing completion and effectiveness of the nonsupervisory and administrative frame( Ikhide, 1997)
Statement Of Problem
This study attempts to examine the extent to which the liberalization policy has resolve the problems being in the system which are direct controls, the pervasive Government intervention in the fiscal system and the attendant stifling of competition and resource misallocation.
This study attempts to find out the extent to which the liberalization policy has resolve the problem of externalities, which relates to the deformations caused by high and unpredictable affectation.
This study is concerned with the impact of the liberalization policy on the information problems, which is in the form of instructional asymmetries between the suppliers and uses of fiscal services.
Compass Of The Study
This study will take over an analysis of the fiscal liberalization policy with a view to relating the reason that led to the relinquishment of the policy. The focus will be on measuring the influence and goods of fiscal sector liberalization on some capital request Development pointers as far as the vacuity of Data permits. The period of the study is from 1970- 2004 in order to carry out a trend analysis on the before the liberalization period( 1970 – 1985) and after the liberalization( 1986 – 2004).
Defense Of The Study
fiscal sector reforms in Nigeria has embraced a number of programs designed to increase the size, ameliorate the effectiveness and raised the diversity of the fiscal system. This thing is achieved through fiscal liberalization which is viewed as the process of moving towards request- determined prices on all classes of fiscal products, characterized by symmetric entry and exit conditions to all actors adding internationalization as represented by the opening up of domestic requests to transnational competition( Ikhide, Yinusa, 1998).
The liberalization of fiscal institutions and requests is an enhancement in fiscal intermediation, which is considered a necessary condition for stimulating investment, raising productive capacity and fostering profitable Growth and Development.
Objects Of The Study
The general ideal of this study is to determine the extent to which fiscal liberalization have led to the development of the capital request in Nigeria. To achieve this general ideal, the following specific objects will be examined.
1. To give a comprehensive sapience into the structure of the capital request in Nigeria.
2. To examine the impacts of liberalization on the Development of the capital request.
3. To pierce the impact of reform programs like debt conversion programs.
Exploration Questions
This study will be grounded on the following exploration Questions
1. Has the fiscal sector liberalization measures been effective in achieveing its stated objects?
2. Has the fiscal sector liberalization measures been suitable to break the repressed nature of the Nigerian capital request?
3. Has fiscal sector liberalization measures bettered the effectiveness in resource allocation and quality of investment in Nigeria?
Exploration Thesis
Ho fiscal sector liberalization doesn’t have a positive impact on capital request
Development.
Hi fiscal sector liberalization does have a positive impact on capital request Development.
Ho capital request development doesn’t have a positive impact on Economic Growth.
Hi capital request developments do have a positive impact on Economic Growth.
Methodology Of The Study
The study will borrow Econometrics ways to estimate the Models. We’ll use the Ordinary Least Places( OLS) system of estimation and the Cochrane- orcutt correction system.
Sources Of Data
The Data used for this study are attained basically from the publication Central Bank of Nigeria statistical bulletin and Central Bank of Nigeria Annual Statement of Accounts. Others may be attained from Nigeria Stock Exchange and other International Economic Journals.
. Figure Of Proposed Chapters
The final report will be organized into five chapters.
Chapter 1 preface.
Chapter 2 Literature Review
Chapter 3. Theoretical frame and exploration Methodology for the Study.
Chapter 4. Data Analysis and Interpretation Empirical Result.
Chapter 5. Summary, Policy Recommendation and Conclusion.
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