An Empirical Investigation Into The Cost Of Business Financing In The Nigerian Financial System

Abstract

This paper is an attempt to conduct an empirical investigation into the cost of business financing in the Nigerian financial system. The sample data was from the Nigerian Stock Exchange, the Securities and Exchange Commission and the Central Bank of Nigeria. The t-statistic and Spearman's Rank Correlation were employed in the analysis. A comparative analysis of the cost of financing through the money and capital market showed that there is a strong positive relationship between growth in bank credit to companies and fresh capital financed through the capital market. The study revealed that it is cheaper to source capital from the capital market than the money market. The study revealed that it is cheaper to source capital from the capital market than the the money market. Ironically this has not significantly influenced the choice of the capital market as a source of finance by investors even for long – term finance because the SMES which constitute about 90% of the demand for capital in the money market are not sufficiently knowledgeable about the capital market and the benefits of public quotation. However, it is also found that transaction costs in he capital market is high compared to that of other emerging markets.


Journal of Research in National Development Vol. 3 (2) 2005: pp. 74-86