The Import of the Global Economic Meltdown for the Stability of Nigeria’s Capital market

Abstract

The global economic meltdown is a development that has not only gained much attention but has precipitated action both globally and nationally. The genesis of the economic crisis which is largely financial in nature was precipitated by the collapse of the sub-prime mortgage market in the United States of America in 2008 and reverberated almost spontaneously in virtually all the world economies but with much profound negative consequences on the larger or developed economies. The capital market is a very valid subcomponent of a nation’s financial system, and its role in the sustenance of the economy cannot be overemphasized. A stable capital market, and by extension, a stable financial system is a sine-qua-non for economic growth and development. Hence, it becomes imperative to investigate the stability or otherwise of the Nigeria’s capital market in view of the threat generated and, or externally induced by the global economic environment via the global economic meltdown. To this end, based on the Daily Activity Summary, the monthly capital market (time series) data were collected through secondary data source, the Nigeria Stock Exchange, over a three year period, 2007 – 2009 on such critical market indices as volume of transactions, value, all-share-index, and market capitalization. A graphical presentation of the time series data was effected for each of the market indicators with a view to assessing the trend. Similarly, regression analysis was performed for each of the market indicators. Analysis revealed relative instability in the movement of virtually every market indicator investigated. It could thus be concluded that the disturbance from the global environment might partially explain the relative instability. It was therefore recommended that relevant authorities should constantly scan and monitor developments in the global environment with a view of making appropriate actions and putting in place measures that would most likely serve to minimize potential negative effects on Nigeria’s capital market.