PROJECT CODE: 000263

THE EFFECT OF THE GLOBAL FINANCIAL MELTDOWN ON THE

NIGERIAN ECONOMY

BY

EJUMAFOR JUDITH EMUOBO

DELTA STATE UNIVERSITY

ABRAKA, NIGERIA

OCTOBER, 2012

1
PROJECT CODE: 000263

TABLE OF CONTENT

Cover page -- -- -- -- -- -- -- -- -- --

Title page -- -- -- -- -- -- -- -- -- -- ii

Certification -- -- -- -- -- -- -- -- -- iii

Dedication -- -- -- -- -- -- -- -- -- -- iv

Acknowledgements -- -- -- -- -- -- -- v

Table of Contents -- -- -- -- -- -- -- -- vi

Abstract -- -- -- -- -- -- -- -- -- -- x

CHAPTER ONE: INTRODUCTION

1.1 Background to the Study -- -- -- -- -- 1
1.2 Statement of the Problem -- -- -- -- -- -- 5
1.3 Objectives of the Study -- -- -- -- -- -- 6
1.4 Statement of the Research Questions -- -- -- -- 7
1.5 Statement of the Research Hypotheses -- -- -- -- 7
1.6 Significance of the Study -- -- -- -- -- -- 8
1.7 Scope of the Study -- -- -- -- -- -- -- 9
1.8 Limitation of the Study -- -- -- -- -- -- 10
1.9 Operational Definition of Terms -- -- -- -- -- 11
References -- -- -- -- -- -- -- -- 13

CIIAPTER TWO: LITERATURE REVIEW

2.1 Introduction -- -- -- -- -- -- -- -- 15
2.2 Global Financial Meltdown -- -- -- -- -- -- 17
2.3 Global Financial Meltdown: Nature and Origin -- -- 20
2.4 Causes of the Global Financial Meltdown -- -- -- 27

2
PROJECT CODE: 000263

2.4.1 The Global Financial Crisis -- -- -- -- -- -- 27

2.5 Aftermath of the Global Financial Crisis on African
Capital Markets -- -- -- -- -- -- -- -- 29
2.6 The Impact of the Global Financial Crisis on the
Nigerian Capital Market -- -- -- -- -- -- 31
2.7 Global Financial Crisis: The US Sub- Prime
Mortgage Phase -- -- -- -- -- -- -- -- 38
2.8 Impact of the Global Financial Meltdown on Nigerian
Economy - -- -- -- -- -- -- -- -- 43
2.9 The Global Financial Meltdown and Capital Market -- 47
2.9.1 All Share Index (AIS) -- -- -- -- -- -- -- 48
2.9.2 Market Capitalization -- -- -- -- -- -- -- 49
2.9.3 Volume and Value of Stock -- -- -- -- -- -- 50
References -- -- -- -- -- -- -- -- 52
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction -- -- -- -- -- -- -- -- 58
3.2 Research Design-- -- -- -- -- -- -- -- 58
3.3 Population of the Study -- -- -- -- -- -- 59
3.4 Sample and Sampling Techniques -- -- -- -- 60
3.5 Method of Data Analysis -- -- -- -- -- -- 60
3.6 Model Specification -- -- -- -- -- -- -- 61
References -- -- -- -- -- -- -- -- 63

CBAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1 Introduction -- -- -- -- -- -- -- -- 64
4.2 Correlation Analysis -- -- -- -- -- -- -- 64
4.3 Analysis of Variance/Hypotheses Testing -- -- -- 68
CHAPTER FIVE: SUMMARY, CONCLUSION AND POLICY
RECOMMENDATION
5.1 Summary of Findings -- -- -- -- -- -- -- 75
3
PROJECT CODE: 000263

5.2 Conclusion -- -- -- -- -- -- -- -- -- 76
5.3 Recommendation -- -- -- -- -- -- -- -- 77
Bibliography -- -- -- -- -- -- -- -- -- 81
Appendix -- -- -- -- -- -- -- -- -- 88

4
PROJECT CODE: 000263

ABSTRACT
This study examined the global financial meltdown and its effect on the
Nigerian Economy. In order to do this, secondary data sourced from the
Nigerian Stock Exchange Fact Book was utilized The Ordinary Least Square
statistical tool was used in analyzing the data obtained in the study. Based on
the analysis of data and test of hypotheses, the study found that the global
financial meltdown was caused by some factors amongst which are the
dwindling nature of inflation rate, a burst in the US housing bubble and
enormous debt burdens by firms and government. Additionally, the study
found that the global financial meltdown affects economic growth. Despite
the effect, there are measures towards mitigating it on the economy. Thus, it
was recommended amongst others that deepen financial sector reform should
be embarked upon. Consequently, policy makers should embark upon
concerted measures aimed at diverging the economy away from reliance on
oil Finally, it is important to strengthen the regulatory framework of the
financial system by way of granting more powers to the various regulatory
agencies like Central Bank of Nigeria, Nigerian Stock Exchange, Securities
and Exchange Commission, Nigeria Deposit and Insurance Commission.
This should curtail excessive deregulation of the financial markets and
strengthen supervision.

5
PROJECT CODE: 000263

CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The global financial crisis which rocked the world economy during
the period from 2007 2009 represented the most serious and dire
financial crisis the world has faced since the Great Depression. It was
clearly a crisis brewed and blended in the United States of America
(USA) but marketed across the globe via a labyrinth of information and
communication networks. The Crisis was ignited by a burst in the USA
housing bubble and grew to engulf global stock markets, over leveraged
financial institutions, corporate house and governments in a an inferno
of ruined expectations and lost wealth (Chuka, 2011). Dibra (2010)
opined that the first global casualty of the financial crunch was the
America Presidential Election, Senator McCane the Republican Party
Candidate who seemed to be a plausible choice for the race until the
onset of the financial crisis. He did not seem to have a clear road map
out of the threatening economic crisis. Indeed ad the economic challenge
persisted, he seemed to put every wrong foot forward. The rapidly with
which his campaign unraveled the nest is now history as the first black
emerged as the US president-Barrack Obama. In Nigeria, the symptoms
of the financial meltdown were felt mainly in thee directions. First was
that the capital market in Nigeria took a plunge where lot of personal
wealth and life savings just went down the drain. Second,
unemployment situation was already desperate before the crisis ensued.
The meltdown has in no way mitigated the problem, money was getting
more scare and costly and the naira was sliding very bad against the
dollar. Third, there was a sharp drop in the amount available for
distribution from the Federation Account (Nwanna, 2010).
According to Global Reporting Initiative (2007), in order to
salvage the antecedents of the global financial crisis, the Nigerian
6
PROJECT CODE: 000263

government took varied measures aimed at mitigating the effect of the

crisis on the Nigerian economy. This was done through a cut in public
expenditure and rolled back in government financial commitments to
different sectors of the economy. While the more developed economies
saw a need to adopt a cheap money policy to encourage industrialists to
borrow and invest in Nigeria, interest rates were on a steadily rising
course. The veritable consequence is that while there are glimmers that
the world may soon be emerging from the crisis, there is no discernible
sign that the same can be said of Nigeria. Altman (2009) described the
global financial crisis as an inevitable aftermath to a season of sharp
business and economic degradation, deliberate corporate mis-
governance and the fraudulent financial statements reporting. For a
while, the global economy tattered on the brink of recession. The fall
outs were fairly predictable, stock markets fell with a crash, over
leveraged large financial institutions collapsed under their enormous
debt burdens and government have been involved in crisis management
complete with rescue packages and public equity intervention to bail out
the ailing system.
Dibra (2010) opined that this scaly scenario was fairly
unpredictable on economies of the world. So where is all these leading
to? What sense can we make of all these confusions particularly for the
economy? What are the implications of these scary scenarios? What
benefits and penalties flow from the misadventures of all the immediate
past? These and other issues constitute utmost concern to researchers the
world over. In the light of the foregoing, this study examined the global
financial meltdown and its effects on the Nigerian economy.

1.2 Statement of the Problem

Cyclical trends in the world economy define the peaks and troughs
of economic prosperity and downturn in the economic management of
7
PROJECT CODE: 000263

the nation (Blomerg, 2008). The global financial meltdown in the world
is a major challenge to all the countries in the world both developed,
developing, and under-developed that is facing the heat of the financial
crisis (Ferguson, 2008). There are opinions and arguments raised as to
whether the global financial crisis has a direct or indirect effect on the
Nigerian economy. It becomes too much contradictory when considering
opposing facts before hands. Thus, this study examined the global
financial meltdown and its effects on the Nigerian economy.

1.3 Objectives of the Study

The broad objective of this study is to examine the global financial
meltdown and its effects on the Nigerian economy. The specific
objectives of the study include:
1. To find out the causes of the global financial meltdown.
2. To ascertain the effect of the global financial meltdown on
Nigerian economic growth.
3. To assess measures towards mitigating the effect of the global
financial meltdown on the Nigerian economy.

1.4 Statement of the Research Questions

The study was guided by the following research questions:
1. What are the causes of the global financial meltdown?
2. What are the effects of the global financial meltdown on Nigerian
economic growth?
3. What are the measures towards mitigating the effect of the global
financial meltdown on the Nigerian economy?
1.5 Statement of the Research Hypotheses
The study was based on the following research hypotheses:
Hypothesis I
H0: The global financial meltdown is not caused by some factors.
8
PROJECT CODE: 000263

Hi: The global financial meltdown is caused by some factors.

Hypothesis II
H0: The global financial meltdown will not affect economic growth.
Hi: The global financial meltdown will affect economic growth.
Hypothesis III
Ho: There are no measures to mitigate the effect of the global financial
meltdown on the Nigerian economy.
Hi: There are measures to mitigate the effect of the global financial
meltdown on the Nigerian economy.

1.6 Significance of the Study

This research study was necessitated to ascertain how the
continuous meltdown in the world financial sector has affected the
Nigerian economy, considering different opinions that advocated Nigeria
isolation from the global financial crisis. This research study however
will reveal the cause of the global financial meltdown. It will help to
correct opposing views and also the study will examined the implication
of the global financial meltdown on the Nigerian economy. Similarly, the
study will proffer bailout recommendations and preventions of the
global financial meltdown. The study will reveal the impacts of the
global financial crisis on the Nigerian stock exchange, the Naira and her
foreign reserves. Finally, the relevance and significance of the study is
also to ascertain the extent to which the global financial meltdown
impacts negatively on the nations financial sector and the relevant
recommendations to bail out the economy.

1.7 Scope of the Study

The scope of this study will be restricted to the effects of the global
financial meltdown on the Nigerian economy. Interviews and
9
PROJECT CODE: 000263

questionnaires will be tailored towards ascertaining the objectives of the

study. Similarly, all findings from journals, periodicals, international
dailies and prior research will seek to know the implication of the global
financial meltdown on the Nigerian economy.

1.8 Limitation of the Study

There are no studies that do not face one constrain or the other. The
study was constrained by time and finance.
Time: There was insufficient time for carrying out this study
especially when the researchers combined lectures with the
research work.
Finance: Considering the hike in general price levels, the
researchers resources were not able to cover majority of its
sampled respondents.
Despite these limitations, it is hoped that it will not hamper the quality
of the research work.

1.9 Operational Definition of Terms

Stock Exchange: These are organized and regulated financial
markets where securities (bonds, notes, shares) are bought and sold
at prices governed by the forces of demand and supply. In other
words, it is a place where trading in securities takes place.
Market Capital: Market capital of a company means the value of
the company. It may have the causes of increasing share price to
fulfill Basel U or other thing
Mortgage Markets: These are markets for loans to people and
organizations buying property.
10
PROJECT CODE: 000263

Economic Meltdown: This refers to a situation where financial

institutions begin to lose large parts of their value.
Economic Exposure: This refers to changes in the value if a firm
or their financial assets arising from charges in exchange rates or
prevailing conditions in the global financial architecture.

11
PROJECT CODE: 000263

REFERENCES
Altman, R.C. (2009) The Great Crash of 2008. Available online at
http://www.foreignaffairs.org

Blomberg, T. (2008). Credit Swap Disclosure Obscures True Financial

Risk Available online at http ://www.blomerg collapse. news
Chukka, B.O. (2011). Global Financial Crisis: Impact on the Changing
Face of Accountancy Profession. Lecture Series, 001 Anambra:
Charles and Patrick Limited.
Dibra, NO. (2010). The Changing Role of the Auditor: A Post En-on
Analysis. Unpublished Ph.D Seminar Paper, Department of
Accountancy, Abia State University, Nigeria.

Ferguson, N. (2008). The End of Prosperity. Time Magazine, Vol.173(9),

March 2
Global Reporting Initiative (2007). The Global Financial Meltdown.
Available online at http://www.globalreporting.org
Nwanna, 1.0. (2010). Volatility and Risk-Return Implication of Global
Financial Meltdown in Nigeria. International Journal of
Accounting and Finance, 12(6): 1-17

12
PROJECT CODE: 000263

TO GET THE FULL PROJECT MATERIAL (CHAPTER 1 TO

FIVE) FOLLOW THIS SIMPLE STEPS:
STEP 1: visit any Ecobank/Zenith Bank branch nearest to
you and pay into the account details below:

STEP 2: After payment, SMS the Teller Number, the

project code (can be found at the header of this
project work) and your Email address TO
08067950556, 08110684119.
Upon confirmation of the payment, the full
project will be sent to you (this will usually
take few minutes after payment is confirmed).
STEP 3: Go to your mail and download the full project
materials.
NB: To view other Banks, Click HERE
DISCLAIMER:
We at Teezed strongly advice that the research you will get
from us should be used only as a guide rather than as a
template for personal research. This research work is intended
to guide you and to provide you with idea on how a typical
research work looks like. Plagiarism still remain a sactionable
offence. Goodluck!!!

13