PRIVATIZATION AND STOCK MARKET DEVELOPMENT ABSTRACT This study was carried out with the aim of appraising privatization and stock market development. In order to actualize the objectives of the study, a sample of 100 respondents were randomly selected. In this study, various literature and theoretical issues were discussed. The instrument used for the purpose of this research was gathered through primary and secondary sources. The primary source is through questionnaires while the secondary source extracts from textbooks by different authors, journals and other publications. The mass of information generated from the questionnaires was summarized in form of table and analyzed using simple percentage. The researcher administered one hundred (100) questionnaires to respondents, out of which eighty (80) questionnaires were retrieved for the purpose of presenting and analyzing responses to issues raise in the questionnaires. However, the returned questionnaires are taken to 100%. The hypotheses stated in the study were tested using correlation analysis. The findings from analysis revealed among other things that, privatization has enhanced the performance of the stock market development. Recommendations were however made by the researcher. TABLE OF CONTENTS CHAPTER ONE: INTRODUCTION General Description of the Area of Study Statement of the Research Problem Objective of the Study Research Hypotheses Scope of the Study Significance of Study Limitation of the Study CHAPTER TWO: LITERATURE REVIEW Introduction Privatization Stock Market Development Stock Market Development And Long –Run Growth Privatization and Stock Market Development CHAPTER THREE: METHODOLOGY Introduction Research Design The Population and Sample Sources of Data The Research Instrument Model Specification and Analysis Plan Operationalization of Variables CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION Introduction Descriptive Statistics Research Hypotheses CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS Introduction Summary of Findings Conclusion Recommendations Bibliography Appendix CHAPTER ONE INTRODUCTION GENERAL DESCRIPTION OF THE AREA OF STUDY The Nigeria economy in recent years has been characterized by trends towards increased liberalization, greater openness to world trade, higher degree of financial integration and greater financial developments for industrial growth in Nigeria. A simple model, which relates industrial output growth to openness stock market development and is specified and estimated, using annual data covering the period 1970 – 1977. The empirical evidence strongly suggests that openness to world trade and stock market development are among the key determinants of industrial output growth in Nigeria. The other important factors are human capital input, non-military expenditure, gross domestic product (GDP), which reflects the size of physical capital and inflation. The increased liberalization and openness have motivated high rate of increases in cross-border capital and direct investment flows (Udegbunam, 2002). Both inflows and outflows of private capital have been sharply increasing since the early 1980s. Also direct investment flows to the country have significantly increased during the period (CBN, 1997). But, these flows declined steeply in the early 1990s, due largely to political instability, which was heightened by the annulment of the 1993 presidential election by the military. The Nigeria stock exchange opened its first trading floor in Lagos in 1961 with only 19 securities worth N80 million listed on it. By December 1996 there were 271 securities with a market capitalization of about N280 billion, about 100 issuing houses, over 100 stock broking houses, over 100 floor dealers, several registrars, more experienced and skilled staff and a computerized communication system. Under the privatization programme, the Federal Government (has) thus decided to fully privatize some of its investment, terminate support for others which would be partially privatized and commercialized fully or partially and some others that would still by fully owned by the government (Federal Government Budget Speech, January, 1986). Under the privatization programme as announced on July 20, 1998 by General Abdulasalami Abubakar, government will retain 40% of the telecom, electricity, petroleum refineries, coal and bitumen production, tourism, and spill-overs from the first phase of privatization equities of the affected enterprises whilst 40% will be alienated to strategic investors with the right technical, financial and management capabilities. The remaining 20% will be sold to the Nigerian public through the stock exchange. President Olusegun Obasanjo in his presidential order to the Vice President of the Federal Republic of Nigeria dated 6th July 1999, directed that as the first step in the phased implementation of the administration’s privatization programme, action was to be initiated to enable the sale of shares listed on the Lagos Stock Exchange and owned by the Federal Government its agencies. Privatization is the act of reducing the role of government, or increasing the role of the private sector in an activity or in the ownership of assets. It involves the relinquishment of part or all of the equity and other interest held by the government or its agency in enterprise whether wholly or partly owned by the government, the reduction in state privation, reduction in state subsidies and reduction in state regulation of industries (enterprise) privatization may therefore be full (total) or partial. STATEMENT OF THE RESEARCH PROBLEM The National Council on Privatization (NCP), in accordance with the provisions of the public enterprises (privatization and commercialization) Act of 1999, will from time to time appoint committees and sub-committees comprising knowledgeable individuals to tackle some of the preparatory works necessary at enterprise level in order to ensure a speedy and smooth privatization/commercialization exercise. The main aim of the privatization programme is to shift from public ownership of commercial business to private ownership of assets previously held by government with a view to increasing their productive and allocative efficiencies in terms of lowering cost, prevention of waste, and getting the products to the desired points of consumption as early as possible with the minimal political bureaucracy. Both inflows and outflows of private capital have been sharply increasing since the early 1980s. Also direct investment flows to the country have significantly increased during this period (CBN, 1997). But these flows declined steeply in the early 1990s, due largely to political instability, which was heightened by the annulment of the 1993 presidential election by the military. This problem affected the stock exchange market in Nigeria. Has privatization enhanced the performance of the stock market development in Nigeria? Has privatization has effect on share price in Nigeria? OBJECTIVE OF THE STUDY The aim of the study is to ascertain the effects of privatization and stock market development. The specific objective include to find out if Privatization has enhanced the performance of the stock market development in Nigeria. Privatization has effect on share price in the Nigeria stock exchange. RESEARCH HYPOTHESES These hypotheses have been formulated to serve as a guide for this research work. i. Ho: Privatization has not enhanced the performance of the stock market development. H1: Privatization has enhanced the performance of the stock market development. ii. Ho: Privatization has no effect on share price. H1: Privatization has effect on share price. SCOPE OF THE STUDY This study looks at the development of privatization and stock market development in Nigeria before and after privatization period. The study is limited to quoted stock exchange in Nigeria. The study stock exchange market as earlier mentioned is very broad, but we will capitalize on the stock exchange market in Nigeria. The study also looks at the development of stock exchange market four years before privatization and four years after privatization period. We would also consider the years 1994 – 1998. SIGNIFICANCE OF STUDY The Nigeria Stock Exchange is to support the capital raising process by providing the best quality, most efficient, most cost effective market place for the trading of financial instruments. The Nigeria stock exchange is the hub of the Nigeria capital market. An understanding of this market would enhance its development and performance. I hope that this study would help to create more awareness among investors of the activities of the stock market development which will help them to increase investment and hence economic growth of the nation. The study provides an assessment of the privatization programme and the extent of the success. This privatization programme would help the government to develop mechanism for more effective privatization in future. This study would educate students, academicians and researchers in the field of researches and the study has equipped the researcher academically, economically and socially. LIMITATION OF THE STUDY The inability to obtain a completely random sample shall be a limited in the study also the comprise measurement of variables limits this study. Privatization has enhanced the performance of the stock market development in Nigeria. Privatization has effect on share price in Nigeria. REFERENCES Olaniyan, I. F. (1996), “Beyond SAPL A Policy Framework”, NES 1996 Conference Proceedings. Anyanwu, J. C. and Udegbunam, R. I. (1996), Financial Deregulation, Interest Sensitivity and Stability of Money Demanding in Nigeria. The Nigerian Journal of Economics and Management Studies, 1:122. Khan, Aubhik (2000), The Finance and Growth Nexus, Federal Reserve Bank of Philadelphia Business Review, January/February, 3-14.
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