CHAPTER ONE
1.0. INTRODUCTION
1.1. Background of the Study
Foreign Direct Investment (FDI) not only
offers countries with much-needed resources for domestic investment but also
creates job opportunities, help transfer managerial expertise and technology
all contributing to the advancement of the economy. Most governments have
appreciated the critical role the FDI plays and have established various ways
of attracting it. In theoretical literature, the purpose of FDI is that of a
carrier of foreign technology that can promote economic growth (Jones, 1999).
The most outstanding motivation of FDI
has been resource seeking (Dunning, 2003). Economists consider FDI as an
essential component of economic progression. The need for better economies,
technological advancement, economic growth, poverty eradication and better standards
of living has seen Africa’s nations endeavor to get Foreign Direct Investments pumped
into their economies to help accomplish these (Mishkin & Eakins, 2009).
This study was guided by several theories such as the open system theory,
internalization theory and foreign direct investment dependency theory that
tried to explain the relationships between foreign direct investments and stock
market development. These theories examine the ways through which FDI
contribute to economic growth the irrespective countries. These theories
demonstrate the extent to which FDI contribute to technological change
enhancement through acquisition of new knowledge and capital goods, i.e. the
technological diffusion process. There was a lots of speculation about the contribution
of FDI in the recipient countries with many arguing that it is based on the
existing circumstances in those respective countries. The theories relate FDI
with economic growth of a country which in return leads to stock market
development.
The financial sector greatly contributes
to economic growth since it increases direct foreign investment. Studies have
shown that well organized and run stock markets increase investment, economic
growth and efficiency. Nigeria’s stock market has been defined as both shallow
and narrow. There has been less than 1% growth financing in the stock market
despite the aim to achieve an annual economic growth of 10% by 2030 with a 30%
investment rate which is to be mainly financed by use of domestic resources. A
lot of initiatives such as the institutional development of stock market was
established so as to put more focus on the stock market. These efforts are
assumed to facilitate adequate resources mobilization and efficient allocation
so as to attain growth objectives (Ngugi, Amanja & Maana, 2010).
1.2. Statement of the Problem
The stock market is a major section of
any given economy and its financial structures. It is considered to be a major
financing source for new entities and ventures based on the profitability level
expected. Further, for a country to increase the level of savings and investment
therefore resulting to a growth in the economy the securities market is considered
essential and its role is significant in any country or economy. It is
considered to be a replica around the world of the economic strength of most
countries. Studies by various scholars indicate the positive role of the stock
market which results to economic growth in various countries (Levine &
Zervos, 2005).Some factors that result in the securities market development
include the political stability of a country, the exchange rate, economic
liberalization and foreign direct investment (Adam & Anokye, 2008).
The importance of the development of
stock market in developing economies as a result of FDI is considered to be
very strong. Research from studies shows a triangular causal relationship in;
economic growth stimulation by FDI; positive effects are observed as a result
of economic growth and the ultimate effect is the development of the stock
market promoted by FDI (Adam & Anokye, 2008).
In the Nigerian context, the World Bank
issued the Doing Business 2017 report which showed that Nigeria was ranked
position 92nd out of 189 countries in terms of FDI inflows. From 2016, this was
a 16 gain of places and therefore an improvement. The reason behind this was
the fact that Nigeria simplified its procedures followed in creating business
and ownership transfer and improvement of electricity and credit access.
Nigeria has also embarked on several activities in order to enhance a positive
influence on FDI inflows in the coming years such as relaxing conditions for
obtaining business licenses and public-private partnership development which is
a strategy in the Vision 2030. In addition, Nigeria has also opened most
sectors to foreign investment such as the telecommunications sector which has
mostly attracted FDI due to the fiber optics that were introduced in 2009-2010.
Local researches done on the area of stock market include; Seile (2009) who did
a study on the association between stock market and specific macroeconomic
variables in the NSE such as inflation, GDP,
1.3.0 Objectives of the Study
This study seeks to determine the effect
of foreign direct investments on stock market development in Nigeria, while
specific objective are the following:
i. To know the major problem facing
foreign direct investment on stock market in Nigeria
ii. To determine the attitude of people to
direct investment.
1.3.1
RESEARCH QUESTIONS
1. What are the
major problem facing foreign direct investments on stock market?
2. What are the
attitudes of people to direct investment?
3. What are the
strategies for effective foreign direct investment on stock market in Nigeria?
1.3.2. RESEARCH HYPOTHESIS
H0 : Foreign
direct investment play a positive role in Nigeria stock market .
H1: Foreign direct
investment does not play a positive role in Nigeria stock market.
H0 : Foreign
direct investment contribute to the significance of stock market in Nigeria .
H1: Foreign
direct investment does not contribute to the significance of stock market in
Nigeria.
1.4. Significance of the Study
The study findings are hoped to be of
benefit to policy makers in developing invest
ment strategy policies and developing the necessary institutional
framework required to market Nigeria as an ideal foreign investment
destination. Also, it will help them in coming up with policies that ensures
consistent development of the stock market and thus protecting the profit
margins and net present values of current and potential investors alike.
The finding of the study has formed a
future reference to researchers, scholars and students who may aspire to take
out research on the same or correlated field. The study will be helpful to
scholars and researchers in identification of further areas of research another
related studies by highlighting related topics that require further research and
reviewing the empirical literature to establish study gaps. The study findings
will inform the policy direction taken by the Capital Markets Authority and
other stakeholders through issuance of regulations that touches on the market
initiatives that would ultimately result in increased stock market development in
Nigeria.
1.5. Scope of the Study
This research work will base its work
majorly in and some specific area will be used to analyze the project.
Regression analysis will be used to execute
these projects, and the data will be collected from different journals,
newspapers and CBN journals.
Majorly
journals on Nigeria Stock Exchange Market will be analyzed from 2000 till date.
1.6. Limitations of the Study
There are lots of constraints that
hinder the fast and development of this research work, a lots of problem were
faced that limit against the work carried out, such as:
1. Financial
Constraint: A lots of materials are needed for this work, but most of them are
been sold at high price that I'm unable to afford.
2. Time:
There is little time for this work, lots are supposed to be done but due to the
short time we have something’s are reduce or not mention.
1.7.
Operational Definition of Terms
Foreign:
This simply means outside a country, that is something excluded from that
country, it is from other country. e.g.
USA is a foreign country.
Direct
Investment: This is means or process by which money
are been put in place for business or other things that will bring about
interest on the particular principal invest. Investment is the key success of
every business man in life.
Stock
Market: This is a place whereby existing securities are been
sold. Coming together or buyer and seller to buy or sell securities, such as
shares, debentures etc through the middlemen which are brokers and jobbers.
Order for full projects: #2000
Payments method: bank deposit / Bank Transfer
Skye Bank 1
Bank account name: Yekeen Idris Adeseun
Bank account number: 3026132730
GTB Bank 2
Bank account name: Yekeen Idris Adeseun
Bank account number:. 0165460421
Send your payments details to.....
Email: idrisyekeen7@gmail.com or 08167674702
- Your full name
- Your email that the documents will be sent to
- Your payments details
- Your mobile number
No comments:
Post a Comment