FINANCING STATE GOVERNMENT PROJECT THROUGH THE CAPITAL MARKET PROBLEM PROSPECTS

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Financing the state government project through the capital market has brought a lot of problem in our country and people are seeking a way to solve the problems. Now the researcher want to find out the problems encountered in financing the State government project through the capital market and also how the capital market helps in financing the state government project.

Furthermore, the researcher will also find out the functions which the capital market has performed in the funding of government projects. All these point will help the researcher to carry out her work successfully.

1.2 RATIONALE OF THE STUDY

There have been serials of inefficiencies in financing the state government project through the capital market. Hence the reason for this study are:

i. To identify the problems facing state government.

ii. To find out possible solution of solving these problem.

1.3 SIGNIFICANCE OF THE STUDY

The purpose of financing the state government project through the capital market is to ensure the top priorities of the Nigeria government project and the submissiveness of the capital market.

Therefore this study will be a benefit to public and state government by:

i. Providing facilities for the quotation and ready market ability of shares and stocks and opportunity and facility to raise fresh capital in the market.

ii. To provide local opportunities to mobilize long term capital for the long term purpose.

iii. Foreign business also benefit with the facility to offer their shares and the Nigeria public on opportunity to invest and participate in the share and ownership of foreign business.

1.4 BACKGROUND OF THE STUDY

The function of the state government in recent times includes the provision of amenities and infrastructures which are capital intensive in nature. Over the years most state governments especially in the developing countries have been carrying out such functions with funds from external sources as loans grants and development assistance or aids. These resources have often been complemented with domestic resources as statutory allocations from the federal accounts, internally generated funds and domestic borrowing.

However, events in the last few years have indicated the inadequate of these sources. Nigerians experience in financing capital projects has been similar to these of other developing countries with large revenue from oil. Thus, with the down turn in the economy following severe external stocks in the international oil market capital projects becomes imperative, there has been a general shift of focus to the capital market in financing government projects. This term paper attempts an examination of the prospects and problems of financing state government project through the capital markets.

Specifically, this term paper identifies the potentials for the capital market financing facilities like Stadium, municipal market and industrial housing estate amongst others.

1.5 DEFINITION OF THE TERMS

CAPITAL MARKET

This refers to a collection of financial institutions set up for the granting of medium and long-terms loans. It is a market for longer term instruments which include market for government securities, market for corporate bonds, market for corporate shares (stocks) and market for mortgage loans.

REVENUE BONDS

These are issued by state or local government. They are usually project tied and it is expected that the underlying projects should be available enough that both the principal and the interest on the bonds will be paid from the returns accruing to such projects. Examples of such projects are water scheme market building, road and bridges and hospitals etc.

INDUSTRY

Consists of the following economic activity groups, mining and quarrying, manufacturing, construction, electricity, gas, water and sanitary service etc.

PRIMARY DATA

These are facts organized or brought together by the researcher in the course of his research work.

SECONDARY DATA

These are facts pulled by the researcher. These facts had already been in existence. It could either be document or otherwise.