Effects of Finanacial Crises on Nigerian Capital Market
INTRODUCTION
With its roots in banking, the sub-prime mortgage crisis that commenced in the United States in 2007 soon resonated in other sectors of its financial system, and the economy, at large. It spread quickly to the developed economies in Europe, including the United Kingdom, and Asia -with Japan becoming well affected. The emerging economies were not isolated. A transmission channel of the global financial crisis, which has been referred to as the “Globalised Synchronized Slowdown” is the stock market SERE-EJEMBI, (2008). Around the world stock market indicators started falling. The capital market, vis-à-vis the stock market, is a channel through which national economies receive foreign capital flows that make their tendency towards the global economy easy visible. Developments in the market thus become a reflect ion of global financial development. The level of responsiveness, however, depends on the level of development, exposure and insulation of the domestic market from the vagaries of the international. In the case of the Nigerian stock market, following initial relative insulation, the speed of contagion and response was comparatively slower. However, the effects began to manifest in the first quarter of 2008. All market indicators commenced a downward spiral. Negative market growth ensued. The mono cultural dependency of the Nigerian economy contributes to the exposure of the economy to global financial crises
According to Al-Faki (2006), the capital market is a “network of specialized financial institutions, series of mechanisms, processes and infrastructure that, in various ways, facilitate the bringing together of suppliers and users of medium to long term capital for investment in socio-economic developmental projects”. The capital market is divided into the primary and the secondary market. The primary market or the new issues market provides the avenue through which government and corporate bodies raise fresh funds through the issuance of
With its roots in banking, the sub-prime mortgage crisis that commenced in the United States in 2007 soon resonated in other sectors of its financial system, and the economy, at large. It spread quickly to the developed economies in Europe, including the United Kingdom, and Asia -with Japan becoming well affected. The emerging economies were not isolated. A transmission channel of the global financial crisis, which has been referred to as the “Globalised Synchronized Slowdown” is the stock market SERE-EJEMBI, (2008). Around the world stock market indicators started falling. The capital market, vis-à-vis the stock market, is a channel through which national economies receive foreign capital flows that make their tendency towards the global economy easy visible. Developments in the market thus become a reflect ion of global financial development. The level of responsiveness, however, depends on the level of development, exposure and insulation of the domestic market from the vagaries of the international. In the case of the Nigerian stock market, following initial relative insulation, the speed of contagion and response was comparatively slower. However, the effects began to manifest in the first quarter of 2008. All market indicators commenced a downward spiral. Negative market growth ensued. The mono cultural dependency of the Nigerian economy contributes to the exposure of the economy to global financial crises
According to Al-Faki (2006), the capital market is a “network of specialized financial institutions, series of mechanisms, processes and infrastructure that, in various ways, facilitate the bringing together of suppliers and users of medium to long term capital for investment in socio-economic developmental projects”. The capital market is divided into the primary and the secondary market. The primary market or the new issues market provides the avenue through which government and corporate bodies raise fresh funds through the issuance of
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