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Bullion

Keywords

Banking, Finance, Economics, Development Finance and Capital Markets

Abstract

With its roots in banking, the sub-prime mortgage crisis that commenced in the United States in 2007 soon resonated in other sectors of its financial system, and the economy, at large. It spread quickly to the developed economies in Europe, including the United Kingdom, and Asia. In the case of the Nigerian stock market, following initial relative insulation, the speed of contagion and response was comparatively slower. However, the effects began to manifest in the first quarter of 2008. The objective of this paper, therefore, is to review the global financial crisis, in the context of its recent effects on the Nigerian stock market. The timeliness and significance of this subject is in view of the un-salutary resonance that the plunging trends, if not reversed, could have on economic development through stifling the productive sectors' access to lower cost equity capital, amongst others. To this end, the rest of the paper is organised as follows: Section 2 highlights background issues on the global financial crisis, while section 3 contains a review of relevant empirical literature; Section 4 outlines the resonance of the crisis on the Nigerian stock market; Section 5 analyses recent movements in key indicators of the market; Section 6 presents current policy options and perspective measures in resolution. The paper concluded that, the Expectedly, owing to empirically proven cyclical patterns of economic development, there will be future crisis. However, the contagion effect on economies will depend on preparedness. Fundamentally, to curtail severe contagion is to improve on the macroeconomic policy environment. This is critical to influencing the performance of the capital market in general and the stock market, in particular. The time to commence is now, and in anticipation that the winds of current global financial crisis will subside sooner than later.

Author Bio

The Author is a staff of the Central Bank of Nigeria, Abuja.

Publication Title

CBN Bullion

Issue

4

Volume

32

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