An Evaluation of the Role of Financial Markets in Economic Development: A Case Study of Nigerian Stock Exchange
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Background of the Study
Financial markets are vital for economic development, serving as platforms for mobilizing savings, allocating capital, and fostering investment. The Nigerian Stock Exchange (NSE) plays a central role in the country’s financial system, facilitating capital formation and enabling businesses to raise funds for growth (Adeoye & Johnson, 2023).
Despite its significance, the Nigerian financial market faces challenges such as low investor confidence, regulatory constraints, and market volatility. These issues hinder its ability to drive economic development effectively (Nwachukwu, 2024). This study examines the role of financial markets in Nigeria’s economic development, with a focus on the NSE.
Statement of the Problem
The underperformance of financial markets in Nigeria has raised concerns about their contribution to economic development. The NSE, in particular, struggles with limited participation, low liquidity, and regulatory inefficiencies. These challenges undermine its capacity to support capital formation and stimulate growth (Okoro, 2023).
This study seeks to evaluate the role of financial markets in economic development and propose solutions to enhance their effectiveness.
Objectives of the Study
- To assess the contribution of the NSE to Nigeria’s economic development.
- To identify challenges hindering the effectiveness of financial markets in Nigeria.
- To recommend strategies for enhancing the role of financial markets in economic development.
Research Questions
- What is the contribution of the NSE to Nigeria’s economic development?
- What challenges hinder the effectiveness of financial markets in Nigeria?
- What strategies can enhance the role of financial markets in economic development?
Research Hypotheses
- The NSE significantly contributes to Nigeria’s economic development.
- Challenges such as low liquidity and regulatory inefficiencies hinder financial market effectiveness in Nigeria.
- Enhanced market reforms can improve the role of financial markets in economic development.
Scope and Limitations of the Study
The study focuses on the Nigerian Stock Exchange, analyzing its role in economic development between 2023 and 2025. Limitations include access constraints to market data and the evolving nature of financial regulations.
Definitions of Terms
- Financial Markets: Platforms where financial instruments such as stocks and bonds are traded.
- Economic Development: The sustained improvement of economic indicators such as GDP, employment, and income.
- Nigerian Stock Exchange (NSE): The primary securities exchange platform in Nigeria.
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