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IMPACT OF FINANCIAL MELTDOWN ON NIGERIA CAPITAL MARKET

 

ABSTRACT

This study investigated the Impact of financial meltdown of Nigeria Capital Market. Specifically, this paper examined the extent and magnitude of contribution of current global meltdown on the performance of the Nigerian Stock Exchange as well as the financial system and their multiplier effect on the real sector of the economy. The study employed a simple regression analysis. In this study, Capital market performance is proxied as Market turnover (MTV) as the dependent variable while the other explanatory variables to measure the global financial meltdown include the volume of traded equity(EQT),the value of the debenture(Deb),and the market share value(SHRS). Results from SPSS analytical tool revealed that the Nigerian Stock exchange meltdown is not attributed to global financial crisis but the instability of macroeconomic variables in the economy like unfavourable exchange rate, inflationary pressure, and problem of Insecurity, inadequate infrastructural facilities but to mention few. Therefore, it was recommended to policy makers that to resuscitate the Nigerian Capital Market, the Government must provide an enabling business environment devoid of corruption, aiding and abetting among the regulatory institutions and stability of macroeconomic variables to attract foreign direct investors.

 

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

According to Ogungbemi, (2015) ethics is about behavior and ways of thinking, especially in situations where our choice may affect the dignity and well-being of others. Because ethical behavior involves free choice, it cannot be captured in the rule. The standard of reference for what is ethical must exist "outside the human definition" and therefore cannot be open to human negotiation (Ogungbemi, 2015). Although Ayodele in 2014 argues that the terms morality and ethics are often used interchangeably, they can be distinguished. By morality we mean the tradition of laws, rules and practices that exist in every society and that seeks to describe, persuade and demand certain forms of behavior while proscribing others. On the other hand, by ethics we mean the disciplined reflection on morality which constitutes the branch of philosophy which studies moral questions (Ayodele, 2014). Thus, Bossaert, (2015) added that the reflection on the correctness or the error of an act, a law or a rule in particular is an example of ethics. According to Bruce, (2014) ethics is a discipline dealing with the study of what is good and bad, good and evil, and duty and moral obligation. Therefore, ethical issues are the set of customary principles and practices that embody a kind of normative code (of behavior, values) to respect them differently. Better corporate governance and accountability have once again surfaced as demanding issues. Organizations continue to recognize the value of an ethical culture (Bruce, 2014).

However, Idogbe, (2012) agreed that ethics of the administrative performance is among the basic foundations for running the work efficiently and effectively, and an important issue for the administrative to carry out his/her duties. With the expansion of the educational institutions and augmentation of their responsibilities and burdens, it needs the management officials' troublesome responsibilities and assignments, thus each establishment can embrace skilled ethical rules and politics different from the other. This is because every function has its unique own functional ethics to be observed by the workers. Moreover, the commitment of professional leaders to professional ethics motivates them to carry out their work according to rules, regulations, instructions and academic standards, in clear relationships between these leaders and faculty members (Idogbe, 2012).

Consequently, Demmke, (2015) asserted that this relationship will be established on a basis governed by an ethical, academic unit based on mutual respect and demonstrating more individual freedom, so that each one can enjoy a personal independence that motivates him towards more production. Professional ethics is the main framework that controls individual work while remaining within the rules, regulations and guidelines. These are things that can not be transcended, the overcoming of which represents a clear revocation of the demands of profession and ethics (Demmke, 2015). Therefore, it is clear that the ethics of the profession is the self-taught and controlling work of the individual, the point of evaluation of his work and the setting on the right path towards fulfilling the tasks required faithfully. Attention is increasingly focused on the ethics of administrative work, and there is a pressing need for a framework to be observed by managers in order to improve their behavior, to define Their responsibilities and their commitment to their profession and their contribution to the development of the educational institution, and to promote it in order to meet the new challenges (Valock, 2013).

Kayode, (2011) adds that here arises the need for the presence of the ethics of the management profession which will define its path, illustrate and govern its behaviors. As a result, attention has focused on the ethical aspect of the profession and the development of a code of ethics for the management, practice and work management of education and training in this field. Each profession, regardless of the tasks assigned to it, has its ethical and professional foundations to be followed by the workers, and observed by the owners as well. Its ethical criteria are extracted from the nature of its activities and its objectives. Consequently, the ethics of the profession is a set of principles, rules and ethical criteria that must be respected by practitioners of the profession (Kayode, 2011)

Thus, Adesina, (2010) opined that ethics is a system of values and laws that define what is right and what is good. It is fundamentally concerned with goodness and goodness, and the duty of conduct. Then Segun (2010) correspondingly adds that Aristotle considered ethics or conduct as virtue, which has two sides: the mental side and the moral side. Aristotle saw that the mental side could be known by learning, but the moral side could be known through usual actions. In addition, virtue and morality are, in his opinion, a number of essential characteristics, such as truthfulness, trust, chastity, justice and sincerity (Segun, 2010). Furthermore, Omuya, (2011) opined that in Oxford Dictionary, the term "ethics" refers to the principles of politeness and rules of conduct. However, ethics is defined as a number of abstract rules and principles to which humans are subjected in their behavior and which are the criteria for assessing their behavior. These rules and principles are drawn from a global philosophical image based either on the brain or religion, or on both.

Al-Soud & Battah (2013) concluded from this definition and other definitions that:

Ethics are a number of abstract rules and principles These rules and principles are based either upon a mental or religious foundation.

The international literature on this topic indicates that the current trend in the management-related ethical values is based upon many axles such as: importance of citizenship, prevalence of freedom. The American Principals Association defined the ethical dimensions that are revealing in the educational administrative behavior, which were summarized by Idogbe, (2012) as follows:

Making the welfare and interests of students the main focus of its decisions and actions. To fulfill his professional and humanitarian responsibilities faithfully, sincerely and sincerely. Support and safeguard the civil and human rights of all workers.  Respect and respect the constitution, laws and rules applicable to the university. Apply the prescribed educational policies and note the laws, regulations and guidelines of their educational system. To follow proper and suitable was to develop and enhance educational laws and policies. To circumvent use of his/her position to get hold of personal gains or interest, whether in political, social or economic domains. To seek tracking down academic degrees or vocational qualification from accredited institutions. Maintain the professional level and work to improve its efficiency through research and continuity of professional growth. Respect all valid contracts and agreements, and commit to everything that concerns them.

STATEMENT OF THE PROBLEM

It is the identification of the ethical commitment and the university administration of Olabisi Onabanjo University Agro. However, universities are generally considered a safe haven for young adults. Regardless of the instability of the policy or the lethargy of prospects for the economy, investments in education are treated as sacrosanct. Recently, however, it has been discovered that education systems can be as corrupt as other parts of government and economy; And that the values of fairness and impartiality, once regarded as universal characteristics of academic systems, can be supplanted by the interests of individuals, families, ethnic groups and specific institutions. This misconduct includes abuse of power for both personal and material gain. Higher education can be corrupted by: illegal acquisition of goods and services; Cheating in the performance of his normal duties (admissions, degree, graduation, accommodation and university products); Professional misconduct (favoring family members, sexual exploitation, classification bias, research plagiarism, etc.); and cheat in paying taxes and using the property of the university.

It was also observed that universities around the world continue to face very serious problems that have profound implications for the management of education, particularly in developing countries and Africa in particular. Adding to this, Okoli (2015) gave an overview of the many challenges faced by Nigerian creative universities to include struggle to address issues of admission, accommodation, education policies, student unionism, Financing and tastes. In order to position their nations on the threshold of modern civilization, many African governments have plunged reasonable portions of their budget into education. Many of them had ties with developed countries in order to create a trained and trained workforce that would help manage the affairs of nations. Indeed, the most serious challenges have proved to be open crises, given their timing, intensity and consequences. The value of any education system as a consumer of the government's budget lies in its ability to continuously serve its students and society better and remain relevant.

 

 

OBJECTIVE OF THE STUDY

Financial meltdown refers to event like steep fall in stock market, decline in asset value and corporate losses that hurt the economy and investors. The main objective of the study is to provide a scientific investigation into the impact of financial meltdown on the Nigeria Capital Market. Other sub-objectives of this study include:

 

1. To identify the significant difference in stock index between the boom period and meltdown period.

 

2. To identify the relationship between total market turnover of the Nigerian Stock Exchange in the pre and post economic meltdown.

 

3. To identify the fundamental change in the total market turnover in the Nigerian Stock Exchange (NSE) between the boom period and the meltdown period.

The Nigerian Capital Market as a segment of the financial system has evolved with the growth of the Nigerian economy. The market has been predominantly equities driven with the banking sector making up an important proportion of total market capitalization.

RESEARCH QUESTIONS:

 

1.      Is there any significant difference in stock index between the boom period and meltdown period?

 

2.      What is the relationship between total market turnover of the Nigerian Stock Exchange in the pre and post economic meltdown.

 

3.      Is there any fundamental change in the total market turnover in the NSE between the boom period and meltdown period?

 

RESEARCH HYPOTHESIS

 

The research hypotheses that would be tested in the course of this research are stated below as:

 

1.      Ho: There is no significant difference in stock index between the boom period and meltdown period.

 

2.      Ho: There is no significant relationship between total market turnover of the Nigerian Stock Exchange in the pre and post economic meltdown.

 

3.      Ho: There is no fundamental change in the total market turnover in the NSE between the boom period and meltdown period.

SIGNIFICANCE OF THE STUDY

The significance of the study is multi-dimensional. The capital market plays an important role in the growth and development of the National economy. The study will be very useful to prospective shareholders and investors, on how the capital market stimulates investment and savings. Researchers and policy makers will also find the research work very handy by knowing the remote and immediate causes of the financial crisis. The study will assist the government in the area of policy formulation in enhancing the growth and development of the capital market for an improved performance in order to cushion effect of financial meltdown.

SCOPE OF THE STUDY

The scope of the study is limited to the effects of financial meltdown on the activities of the Nigerian Capital Market. The study was restricted to Nigerian Stock Exchange Branch Anambra State. This research work will cover a period of twelve years (12) from (2000-2012), also, the period covered was divided into boom era which is October, 2000 to March 2007 and meltdown period which is between April 2008 to September 2012. This study made use of secondary data which is the descriptive statistics and annual report was taken from the Nigerian Stock Exchange and Central Bank of Nigeria statistical bulletin.

LIMITATION OF THE STUDY

The challenges that posed a threat to this study include the following; fund to be able to assess materials even online and equally type the work, collections and retrieval of documents from faculty, and even those of selected faculty members for the study and attitudes turned to be huge obstacles and time constraints due to other academic pressure. However efforts were made to address these problems or limitations.

DEFINITION OF TERMS

1 capital market: is a financial market in which long-term debt or equity-backed securities are bought and sold, in contrast to a money market where short-term debt is bought and sold.

2. Financial meltdown: Refers to events like steep fall in stock markets, decline in asset values, corporate losses etc. that hurt the economy and lead to losses for investors.

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