THE NATIONAL ECONOMIC EMPOWERMENT AND DEVELOPMENT STRATEGY (NEEDS) AND THE DEVELOPMENT OF CAPITAL MARKET

THE NATIONAL ECONOMIC EMPOWERMENT AND DEVELOPMENT STRATEGY (NEEDS) AND THE DEVELOPMENT OF CAPITAL MARKET

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CHAPTER ONE

1.1     INTRODUCTION

National Economic Employment and Development Strategy (NEEDS) was developed by the National Planning Commission, then headed by Charles Soludo. The Federal Executive Council of Nigeria as a poverty alleviating strategy endorsed it. The aim of the scheme was to meet the Millennium Development Goals of curbing the menace of poverty in Nigeria and bringing it to the barest minimum by the year 2015.

National Economic Improvement and Development Strategy is a way of letting the International Community know where Nigeria stands in the region and the world, and how it wishes to be supported. In looking at the possibilities of National Economic Employment and Development Strategy (NEEDS) m meeting the aspirations of Nigerians, we must not fail to state that NEEDS specifically, addresses the international Development Targets (IDTs), which were set in 1996 to improve economic wellbeing, social and human development and ensure environmental sustainability and regeneration.

In September 2000, 149 world leaders adopted the United Nations Millenniums Declaration which listed a series Millennium Goals (MDGs). The declaration commits UN member states to achieving the following goals by 2015:

-        To halve the proportion of people whose income is less than one dollar a day and who suffer from hunger?

-        Achieve universal primary education.

-        Reduce material mortality by three - quarters and under five child mortality by two thirds. Halt and begin to reverse the spread of HIV/AIDS, malaria and other major diseases. Provide special assistance to children orphaned by HIV / AIDS.

-        Significantly improve the lives of at least 100 million slum dwellers by 2020. In addition, the efforts of the government in achieving NEEDS (i. e needs of Nigerians) as well as the monetary policy will be considered.

Capital market is a market that deals in lending and borrowing in long - term loan able funds.It is the source from which firms obtain their capital for establishment and expansion and from which the government borrows on long-term basis for development purpose.

The stock exchange perform the function of providing facilities to the public for the purchase and sale of stock and shares of any kind and investment of money and controlling the grant of quotation on the exchange in respect of the shares and stock under the listing requirement of the stock exchange market.

Base on the above introduction, the research shall focus on how the NEEDS has been able to contribute to the development of the nation most especially the capital market and the various problems that NEEDS is meant to address in terms of industries, infrastructural development among others.

1.2     PROBLEM ANALYSIS

Prior before the restoration of democracy in 1999, Nigeria as a nation is been faced with series of problems ranging from economic dwindling, inadequate and lack of infrastructural maintenance, poverty and inequality, lack of security and weak and inappropriate public sector among others. The researcher observed that the following problem need to be researched upon:

-         The problem of inadequate and lack of job creation is one of the area in which tireintroduction of NEEDS in Nigeria is meant to address. Hence, has it been able to address this problem?

-         NEEDS equally is expected to address the problem of alleviating poverty among Nigerians. Both the federal and state government have set up various poverty alleviating programme to reduce to the minimum poverty among the citizens.

-         The introduction of NEEDS is also expected to facilitate efficient and effective capital market development. It is also expected to address the problem?

Lastly, the introduction of National Economic Empowerment and Development Strategy (NEEDS) is to meet the Millennium Development Goals by the year 2015.

1.3    PURPOSE OF STUDY

This research is aimed at analysing and critically examining' The National Economic Empowerment of Capital Market.

-        The study will look at the concept of NEEDS and how it contributes to the capital market development.

-        The study is also aimed at look at the concept of capital market.

-        The study is also aimed at look at the concept of capital market and the correlation to the establishment of (NEEDS) National and Capital market can facilitate superioreconomic performance among others.

1.4     RESEARCH QUESTIONS

This aspect of the research question will go a long way in asking various questions aimed at looking in to the 'NEEDS' and the capital market.

1.      Is there any relationship between ineffective infrastructural facilities and the performance of NEED?

2.      What is the relationship between NEEDS and efficient capital market'?

3.      Does any relationship exist between poverty alleviation and NEEDS?

4.      What is the significant relationship between the NEEDS and the development of small and medium scale industry?

1.5     STATEMENT OF HYPOTHESIS

Ho1:   There is no relationship between ineffective infrastructural facilities and the performance of NEEDS.

HA1:  There is relationship between ineffective infrastructural facilities and the performance of NEEDS.

Ho1: No relationship between NEEDS and efficient capital market.

HA2:   Relationship exist between NEEDS and efficient capital market.

Ho3:   There is no significant relationship between poverty alleviation and NEEDS.

HA3:     There is significant relationship between poverty alleviation and NEEDS.

H04:   Relationship does not exist between NEEDS and the development of small and medium scale industry.

HA4:     Relationship exist between NEEDS and the development of small and medium scale industry.

1.6    SCOPE OF STUDY

This research work is expected to cover the National Economic Empowerment and Development Strategy NEEDS and the development of capital market. Various sub-topics like small and medium scale industry; poverty alleviation among others shall be discussed.

However, the primary data (questionnaire) for this study is limited to only hundred (100) staff of selected banks, capital market and small scale industries within the Lagos State. ]

1.7     JUSTIFICATION OF STUDY

The introduction of NEEDS by the government: seeks torestore the trust in government as a facilitator of development, which the country needs badly. The study of NEEDS is important because it enables Nigerians to implements livelihood strategies and achieve personal goals. The government has to stop trying to run businesses and redirect its effort providing essential services. It must sell off the businesses currently under it control in order to free up labour and funds that it can use to improve basic service.

NEEDS is essential because changing the way the government works is a colossal task, but NEEDS will build on processes that have already begun to make a difference.

NEEDs is also important in the area of curbing and strengthening as well as modernizing the anticorruption organisations it has established. Exposing unethical and illegal practices and punishing those who engage in them. It is also expected to establish formal training in ethics and fostering leadership by example.

Furthermore, NEEDS is also essential because it will encourage all levels of government to adopt an annual budget framework and guidelines. The guidelines will promote balanced budgets, implementation of priority programmes, budget discipline, cost effectiveness and the generation of internal revenues and savings.

A peer-review mechanism will enable leads of government agencies to compare their performance and nurture a common culture of excellence. The NEEDS period should be characterized by the punctual release of annual budgets.

The government also instituted massive anti-corruption campaigns and established the independent corrupt practices and other related crimes commission and the Economic and Financially Crimes Commission, which outlaw corrupt practices. The government is committed to the Extractive Industries Transparency imitative, which encourages oil companies to fully disclose revenue and cost of operations.

Lastly, the study of this nature can be justified when one look at the important role that NEEDS play in term of developing the capital market as well as improving the lives of Nigerians.

REFERENCES

1.      NEEDS NIGERIA (2004):           Meeting Everyone's NEEDS by                                                  National Planning Commission.

2.      NEEDS (2007):                    www.cenbank.org.

3.      How Capital Markets Enhance Economic Performance and Facilitate

job Creation. Goldman, SACNS & CO.

4.      Omoruyi, P. (2003):            Capital Market and Portfolio

Management in Practice.

5.      Nnamdi, a. (1991): Research Methodology in the Behavioural

Sciences. Longman Publication, Lagos.

CHAPTER ONE

INTRODUCTION

1.2.BACKGROUND OF STUDY

Commercial banks play an important role in economic development of developing countries. Economic development involves investment in various sectors of the economy. The banks collect savings from the people and mobilize savings for investment in industrial project. The investors borrow from banks to finance the projects.

Special funds are provided to the investors for the  completion of projects. The bank provide a gurantee for industrial loan from international agencies. The foreign capital, flows to developing countries for investment in projects.

Commercial banks are involved in the process of increasing the wealth of the economy, particularly the capital goods needed for raising productivity. The developed economies need the service of the banking system to enable the economy attain economic growth, while the developing economies need the service of banking system for sectorial development.

The financial institution are therefore, capable of influencing the major saving propensities and opportunity. The need to achieve sustained economic growth within any economy can be possible admist strong financial institution and precisely within the existence of a virile banking system. Their activities must be such that are tailored to work in the congruence with government policies and programmes in a bid to attaining the desired macro-economic objectives as a nation.

Schumpeter in 1934 observed that the commercial banking system was one of the key agent in the whole process of development. Generally commercial banks not only facilitates but speed up the process of economic development through making more funds available from resources mobilized.

THE ROLE OF COMMERCIAL BANKS IN ECONOMIC

             GROWTH IN NIGERIA

The banking system is a catalyst and engine of growth that is responsible for being a lifewire to every sector of the economy. It is evident that no sector in the economy can flourish or prosper without the support and services of the banking sector, agricultural sector, manufacturing sector, mining or even services sector can’t do without banks. Commercial banks provide and encourage savings. The establishment of commercial bank especially in the rural areas makes savings possible, hence economic development is accelerated.

Commercial banks provide capital needed for development. Deficit spender unit obtain medium and short term loans and overdraft from commercial banks to start a new industry or to engage in other development efforts. They engage in trade activities through making use of cheques and other financial instrument possible. They encourage investment, provide direct loans to the government and individuals for investment purposes. They provide managerial advices to small-scale industrialists who do not engage in the service of specialist. Commercial banks also render financial advice to their customers including to invest in. Commercial banks create money as an instrument to the apex bank for all its activities. Commercial banks help to enhance development of international trade, these include acting as referees to importers, providing travellers cheque to those going abroad, opening letters of credit as well as providing credit for export. All these helps to promote international trade and relationship between nations, they provide backup liquidity to the economy. They are transmitters of monetary policy and they provide some “value added” from transfering funds from savers to borrowers and providing liquidity.

The current credit crisis and the transatlantic mortage financial turmoil have questioned effectiveness of banks consolidation programme as a remedy for financial stabilty and monetary policy in correcting the defects in the financial sector for sustainable development. The consolidation of banks has been the major policy instrument being adopted in correcting deficiencies in the financial sector. The economic rationale for the domestic consolidation is indisputable, an early view of consolidation was that it makes banking more cost efficient because larger banks can eliminate excess capacity in areas like data processing, personnel marketing or overlapping networks. Cost efficiency also could increase if more efficient banks acquired less efficient ones. Consolidation is viewed as the reduction in the number of banks and other deposit taking institutions with a simultaneous increase in size and concentration of the consolidation entities in the sector. The driving forces in bank consolidation include better risk control through the creation of critical mass and economies of scale, advancement of marketing and product initiative improvements in the overall credit risk and technology exploitation. These drivers has lead to improved operational efficiencies and larger and better capitalized institutions.

1.2 STATEMENT OF THE PROBLEM

Given that the economic trend of the commercial banking industry, one wondered what has hindered economic growth, though an important avenue for banks to boost the growth of the economy through efficient and effective saving investment process(financial intermediation) to stimulate investment and productive activities.

For the past three decades, the Nigerian economy has not shown any favourable sign of growth. For example, the real GNP growth rate figure was 2.8% in 1995 with negative figures in years like 1982, 0.3% etc as depicted in the CBN periodic bulletin in 1986. This shows that the Nigerian economy is not one that can inspire confidence, if no drastic improvement is shown by financial institutions with its economy especially in the new millenium.

1.In what extent does commercial bank as a financial intermediate contribute towards fund mobilization for economic growth and development of the country.

2.What is the essence of commercial banks in Nigerian economy towards fund mobilization for economic growth and development?

3.What are the problems commercial banks encounter in their performance towards mobilization of funds for economic growth and development?

1.3  OBJECTIVES OF THE STUDY

The objectives of this research work are tactily stated as follows.

-To determine the contribution of commercial banks towards a positive economic growth and wealth creation.    

-To examine ways in which the commercial banks in Nigeria can be made to play better roles towards fund mobilization for economic growth and development.

-To analyse the constraints and short comings facing commercial banks in Nigeria towards fund mobilization for economic growth and development.

-To determine and test the effects of some relevant economic variable and factors on the real gross domestic product(GDP) of Nigeria.

1.4  STATEMENT OF THE HYPOTHESIS

This research work will be guided by the following hypothesis.

Commercial banks do not contribute significantly towards fund mobilization for economic growth and development of the country.

The variables of commercial banks are lending deposits, real investment and interest rate etc do not have any impact in the Nigerian economic sector.

The constraints on the activities of the comercial bank do not affect their economic role and activities.

1.5  SIGNIFICANCE OF THE STUDY

The study makes clear the actual contributions and operations of commercial banks in Nigeria. It will also sensitize the society on the importance of commercial banks in Nigeria.

The study  will be important to the policy makers and the federal government inorder that to adapt and implement policy measures that will boost the economy through the financial institution.

It will also depict the negative and positive side of the activities of the general public and bankers, for some correction and changes inorder to boost the economy.

1.6 LIMITATION OF THE STUDYThe main task of the study is to give in full detail the role of commercial banks in fund mobilization for industrial growth and development but due to insufficient time frame for the purpose of simple and articulate analysis, the study is restricted to commercial banks specifically. The study is limited to the period of 1975-2008 which saw the significant role played by the financial sector in the Nigerian economy.

CHAPTER ONE

INTRODUCTION

1.2.BACKGROUND OF STUDY

Commercial banks play an important role in economic development of developing countries. Economic development involves investment in various sectors of the economy. The banks collect savings from the people and mobilize savings for investment in industrial project. The investors borrow from banks to finance the projects.

Special funds are provided to the investors for the  completion of projects. The bank provide a gurantee for industrial loan from international agencies. The foreign capital, flows to developing countries for investment in projects.

Commercial banks are involved in the process of increasing the wealth of the economy, particularly the capital goods needed for raising productivity. The developed economies need the service of the banking system to enable the economy attain economic growth, while the developing economies need the service of banking system for sectorial development.

The financial institution are therefore, capable of influencing the major saving propensities and opportunity. The need to achieve sustained economic growth within any economy can be possible admist strong financial institution and precisely within the existence of a virile banking system. Their activities must be such that are tailored to work in the congruence with government policies and programmes in a bid to attaining the desired macro-economic objectives as a nation.

Schumpeter in 1934 observed that the commercial banking system was one of the key agent in the whole process of development. Generally commercial banks not only facilitates but speed up the process of economic development through making more funds available from resources mobilized.

THE ROLE OF COMMERCIAL BANKS IN ECONOMIC

             GROWTH IN NIGERIA

The banking system is a catalyst and engine of growth that is responsible for being a lifewire to every sector of the economy. It is evident that no sector in the economy can flourish or prosper without the support and services of the banking sector, agricultural sector, manufacturing sector, mining or even services sector can’t do without banks. Commercial banks provide and encourage savings. The establishment of commercial bank especially in the rural areas makes savings possible, hence economic development is accelerated.Commercial banks provide capital needed for development. Deficit spender unit obtain medium and short term loans and overdraft from commercial banks to start a new industry or to engage in other development efforts. They engage in trade activities through making use of cheques and other financial instrument possible. They encourage investment, provide direct loans to the government and individuals for investment purposes. They provide managerial advices to small-scale industrialists who do not engage in the service of specialist. Commercial banks also render financial advice to their customers including to invest in. Commercial banks create money as an instrument to the apex bank for all its activities. Commercial banks help to enhance development of international trade, these include acting as referees to importers, providing travellers cheque to those going abroad, opening letters of credit as well as providing credit for export. All these helps to promote international trade and relationship between nations, they provide backup liquidity to the economy. They are transmitters of monetary policy and they provide some “value added” from transfering funds from savers to borrowers and providing liquidity.

The current credit crisis and the transatlantic mortage financial turmoil have questioned effectiveness of banks consolidation programme as a remedy for financial stabilty and monetary policy in correcting the defects in the financial sector for sustainable development. The consolidation of banks has been the major policy instrument being adopted in correcting deficiencies in the financial sector. The economic rationale for the domestic consolidation is indisputable, an early view of consolidation was that it makes banking more cost efficient because larger banks can eliminate excess capacity in areas like data processing, personnel marketing or overlapping networks. Cost efficiency also could increase if more efficient banks acquired less efficient ones. Consolidation is viewed as the reduction in the number of banks and other deposit taking institutions with a simultaneous increase in size and concentration of the consolidation entities in the sector. The driving forces in bank consolidation include better risk control through the creation of critical mass and economies of scale, advancement of marketing and product initiative improvements in the overall credit risk and technology exploitation. These drivers has lead to improved operational efficiencies and larger and better capitalized institutions.

1.2 STATEMENT OF THE PROBLEM

Given that the economic trend of the commercial banking industry, one wondered what has hindered economic growth, though an important avenue for banks to boost the growth of the economy through efficient and effective saving investment process(financial intermediation) to stimulate investment and productive activities.

For the past three decades, the Nigerian economy has not shown any favourable sign of growth. For example, the real GNP growth rate figure was 2.8% in 1995 with negative figures in years like 1982, 0.3% etc as depicted in the CBN periodic bulletin in 1986. This shows that the Nigerian economy is not one that can inspire confidence, if no drastic improvement is shown by financial institutions with its economy especially in the new millenium.

1.In what extent does commercial bank as a financial intermediate contribute towards fund mobilization for economic growth and development of the country.

2.What is the essence of commercial banks in Nigerian economy towards fund mobilization for economic growth and development?

3.What are the problems commercial banks encounter in their performance towards mobilization of funds for economic growth and development?

1.3  OBJECTIVES OF THE STUDY

The objectives of this research work are tactily stated as follows.

-To determine the contribution of commercial banks towards a positive economic growth and wealth creation.    

-To examine ways in which the commercial banks in Nigeria can be made to play better roles towards fund mobilization for economic growth and development.

-To analyse the constraints and short comings facing commercial banks in Nigeria towards fund mobilization for economic growth and development.

-To determine and test the effects of some relevant economic variable and factors on the real gross domestic product(GDP) of Nigeria.

1.4  STATEMENT OF THE HYPOTHESIS

This research work will be guided by the following hypothesis.

Commercial banks do not contribute significantly towards fund mobilization for economic growth and development of the country.

The variables of commercial banks are lending deposits, real investment and interest rate etc do not have any impact in the Nigerian economic sector.

The constraints on the activities of the comercial bank do not affect their economic role and activities.

1.5  SIGNIFICANCE OF THE STUDY

The study makes clear the actual contributions and operations of commercial banks in Nigeria. It will also sensitize the society on the importance of commercial banks in Nigeria.

The study  will be important to the policy makers and the federal government inorder that to adapt and implement policy measures that will boost the economy through the financial institution.

It will also depict the negative and positive side of the activities of the general public and bankers, for some correction and changes inorder to boost the economy.

1.6 LIMITATION OF THE STUDY

The main task of the study is to give in full detail the role of commercial banks in fund mobilization for industrial growth and development but due to insufficient time frame for the purpose of simple and articulate analysis, the study is restricted to commercial banks specifically. The study is limited to the period of 1975-2008 which saw the significant role played by the financial sector in the Nigerian economy.



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