Financial Globalisation and its Consequential Impacts on the Nigerian Capital Market

Description

ABSTRACT

Financial Globalization and its Consequential Impacts on the Nigerian Capital Market

Samuel Ayomide Dunmade*

The nexus between financial globalisation and the development of the Nigerian capital market has surged over the years. Much jurist ink has flown in analysing the relative impact between financial globalisation and the development of the Nigerian capital market; in  this regard, one school of thought posits that participating in the international markets may bring rewarding impacts on domestic economies because it may spark a reaction among investors [international and domestic] and also encourage them to invest in the domestic markets.₁ Another school of thought postulate that internalisation may lead to a steady movement of local liquidity to the international market in an epic event of liquidity agglomeration, which may lead to adverse spillover effects on domestic markets.₂ This paper discusses the meaning, history and scope of financial globalisation, the impact of financial globalisation in the Nigerian capital market, the role of the capital market in the Nigerian economy, the policy and structural developments in the Nigerian capital market, the dissenting schools of thought on financial globalisation, and the notable impacts of financial globalisation to capital market development.

Keywords: Financial globalisation, Nigerian capital market, Development.

INTRODUCTION
The impact of financial globalisation on the Nigerian Capital Market cannot be overemphasised. Financial globalisation, a daunting yet compelling phenomenon, has dramatically accelerated over the last few decades. The discourse of economies witnessing the rise and fall of an inextricably linked global financial system culminates within the framework of financial globalisation, a manifestation of economic integration fueled by liberalisation, technological advancements, and policy reforms.₃

*LLB, B.L

1. F Abraham, & SL Schmukler, Financial globalization: A glass half empty? Handbook of Finance and Development, (2018) 338 – 368 accessed 12 July 2023.
2. C Calderon & M Kubota, ‘Does Financial Openness Lead to Deeper Domestic Financial Markets?’ (2009) Policy Research Working Paper; World Bank, No. 4973 accessed 12 July 2023.
3. M Obstfeld, ‘International Finance and Growth in Developing Countries: What Have We Learned?’ accessed 20 September 2023. In spite of numerous studies examining various aspects such as cross-section, panel data, and event analyses, there is a noticeable scarcity of compelling evidence demonstrating direct positive effects of financial liberalization on the economic wellbeing and growth rates of developing nations. The statistical challenges faced in this area resemble those encountered in research on the relationship between trade liberalization and economic growth, but they seem to be even more pronounced when it comes to financial matters. Moreover, there is limited systematic data supporting the idea that financial liberalization indirectly improves welfare by encouraging related reforms in a country’s economic institutions or policies. Interestingly, the opening up of a country’s financial sector does seem to lead to an increase in both the frequency and severity of economic crises. Nevertheless, developing nations have been progressively moving towards greater financial openness over time. A plausible explanation for this trend is that as economies grow, their financial sectors tend to expand, and when a country engages in international trade, its financial system inevitably becomes more interconnected with global financial flows, making isolation from cross-border financial activities increasingly difficult to maintain.

THE GRAVITAS REVIEW OF BUSINESS & PROPERTY LAW Vol.14 No.4