Capital markets are an essential component of an operating contemporary economy because they serve as a conduit for the transfer of money from those who possess it to those who require it for productive use. It has repeatedly been discussed that there is a positive relationship between the economic development of a nation and the degree of sophistication of its capital market structures. For instance, while the United States of America boasts of a world-leading $23-trillion economy, its different capital markets have a combined valuation estimated at double that figure. In contrast, Burundi, one of the world’s poorest nations, has no defined capital market ecosystem despite little or no restrictions on portfolio investments.
For an emerging economy like Nigeria, a thriving capital market will play a vital role in strengthening the economy and with the presence of market players like CardinalStone Securities – the securities trading firm solely responsible for executing the Union Bank deal, the largest trade in Nigeria’s capital market history, the growth of the capital market is sure to have a positive domino-effect on the nation’s economy.
Some of these effects include:
1. Increased prosperity amongst citizens: For both the primary and secondary market, the capital market is people driven, and in a thriving market, investors can be sure to get a great value for their money. For instance, the largest divestment/acquisition deal executed in the Nigerian Capital Market had a trade value of a whopping ₦191 billion (US$461 million). This deal which was facilitated by CardinalStone Securities has spread prosperity across the nation with investors already reaping a maximum return on investment. The leading securities trading firm is also known to be home to some of the best industry experts executing the best deals for its large clientele. Beyond that, the capital market allows traders to buy and sell stocks & bonds and enables businesses to raise financial capital to grow.
2. Boosts foreign direct investment: A significant relationship exists between foreign direct investment and capital market development in Nigeria. In fact, the Central Bank of Nigeria regards the market as a veritable source of attracting foreign investment. Research shows that one of the major attractions for FDIs is the profit or the return they get for the investment made. Interestingly, major firms like CardinalStone Securities deliver top-notch equities investment services to both international and local clients, provides strategies on how to maximize value and make investing in the Nigerian Equities market a breeze.
3. More money in the economy: The World Bank Group views local capital markets as critical in accelerating the sustainable economic growth needed to broaden prosperity and reduce poverty. Several studies have also shown that the economies of thriving countries are largely influenced by their capital market. Bull markets generally exist when economic conditions are, and consumers & businesses are confident about future expectations. When their confidence is riding high, consumers are likely to spend more, and by extension boosts the economy.
Without a doubt, the Nigerian capital market has what it takes to strengthen the country’s economy and lower capital flow volatility.