The Nigerian Capital market over the years has played a vital role in sourcing for funds for investment. This resources sought for, have been mobilized, and as well diverted through productive channels in the Nigerian economy by the Nigerian capital market.
And as a result of this transactions by the Nigerian capital market, there have been evident of growth in the Nigerian economy. Indeed, the Nigerian capital market has helped promotes and facilitates the process of development in Nigeria.
Hence, the significance of the Nigerian capital market cannot be underestimated, and in this article, we are going to discuss some of the functions of the Nigerian capital market that have helped makes Nigerian economy a viable economy.
What Is Nigeria Capital Market?
Capital market is a market where there is buying and selling of financial securities, such as stocks and bonds among others by the participants, who are actually individuals and/or institutions. Products in this market, which are mainly securities are traded mostly in long-term.
Functions Of The Nigerian Capital Market
There are numerous functions performed by the Nigerian capital market which has helped boost the economy of the country, and I will be discussing few of them in this article. Below are some of the functions of the Nigerian capital market.
1. Nigerian Capital Market Serves As Link Between Investors And Savers
Part of the functions of the Nigerian capital market is to stand as intermediary between the savers and the investors, that is to say that, the Nigerian capital market is that link between savers and investors.
It plays a significant role in galvanizing all the savings and as well, see to it that, these savings are diverted in investments it deems would be productive.
Interestingly, the Nigerian capital market is very careful when it comes to investment because it does not only facilitates the economic growth of the country, it also needed to encourage the investors by discretely investing the investors funds in a productive channels, so as to satisfy the investors and generates income too, for the Nigerian capital market for administrative purposes.
By so doing, the Nigerian capital market has played an important role, as it helped transferred the resources from where it would have been surplus funds which perhaps, such funds could have been wasteful to deficit funds by carefully investing these resources in the productive areas, and as a result boosted the economic growth of the country and the prosperity of Nigeria as a nation.
2. Nigerian Capital Market Encourages Savings
The Nigerian capital market has helped in encouraging individuals to save their monies through their activities as one of the financial institutions.
As a complementary efforts, other financial institutions have made provisions for facilities, which have also helped encouraged savings, even those institutions that are not among the banking industry have volunteered to provide these facilities too with a view to encourage members of the public to save more.
This however, has been a welcome development, given the fact that, in most under-developed nations of the world, where these is no capital market, findings have however, revealed that, there this sense of apathy among these persons, when it comes to saving.
In fact, there are little or no savings and those few individuals, who may save, they are often invest their savings in areas that are not productive and in most cases, they normally loss their savings in an unproductive directions.
Therefore, such a wasteful investment of one’s savings can actually paint a picture of how important the capital market is to people’s socioeconomic activities.
3. Nigerian Capital Market Encourages Investment
Lending in order to boost socioeconomic activities can encourage investment. Just like in the case of Nigerian capital market encouraging savings, it also encouraged investment. How does Nigerian capital market encourage investments?
This is done by way of facilitating the process of lending to investors. Who is an investor? Investor could be a businessman and/od a government, by facilitating lending, the Nigerian capital market has so far encouraged investments.
It is worthy of note that, the Nigerian capital market do make provision for facilities through financial institutions, such as banks and other non financial institutions.
For instance, financial assets, such as, shares, and securities, and bonds among others, in a way, do enticed individuals to saved monies and afterwards lend their monies to either businessmen and/or to the the government.
They can even invest their monies in any industry of their choice. It is quite obvious that, in today’s modern society, and with the growth of financial institutions, resources are becoming more mobile, as banking industry’s interest rate falls thus, increases investments.
4. Nigerian Capital Market Promotes Economic Growth
One of the functions of the Nigerian capital market is that of facilitating the Nigeria’s economic growth. The effect of the Nigerian capital market is seen almost in all aspects of the economy.
Apart from accelerating the pace of development, it has also smoothened the pace at which the economy of the country grows. Do not foget that, Nigerian capital market has numerous institutions, and one of such institutions is nonbank financial intermediaries.
What this institution does is to allocate resources in rational manner according to the development needs of Nigeria as a nation, and when these resources are properly allocated, the resultant effects would be an expansion in the area of trade and industry, both in the public sector and that of the private sector.
This eventually would brought about balance in the economic growth of Nigeria.
5. Nigerian Capital Market Stabilizes Security Prices
Another function of the Nigerian capital market has been in the area of stabilizing security prices.
This happened as the values of stocks and securities stabilizes thus, the fluctuations that normally occurs in the prices of the security is reduced to the minimum.
Quite interestingly, the stabilization of security prices is done through the provision capital to individuals, who may want to borrow, and they are given these monies at interest rate that is quite lower.
By so doing, the speculative and unproductive activities would be drastically reduced.
The Nigerian capital market indeed has played a significant role in facilitating the economic growth of Nigeria through encouragement for savings and investment.
The Nigerian capital market, apart from playing an important role in developing Nigeria economically, has helped in transferring resources from where there were surplus funds which perhaps, such funds could have been wasteful to deficit by carefully investing these resources in the productive areas, and as a result boosted the economic growth of the country and the prosperity of Nigeria as a nation.
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