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Many efforts have been made towards understanding the relationship between capital market and the economic growth of Nigeria. The capital market of every economy is setup for the attainment of specific objectives which includes economic growth and stability, the contributions of the capital market towards the economic development of Nigeria.Data was collected and analyzed using ordinary least square analysis. The result of the study shows that the capital market has a positive and significant impact on the country’s economic growth. It also revealed the limited contribution of the market to the development of the industrial sector as a result of the absence of some developing stimulating subsectors. On the strength of this evidence, this work recommends that government should introduce some tax incentives to motivate and encourage investors. Finally, listing on the exchange should be made mandatory for companies that have attained a given level of capitalization. If these recommendations are efficiently implemented, the effectiveness of the Nigeria stock exchange will be enhanced.



Every economy seeks to appropriate industrial base to move the economy from a traditional and low level of production to a more automated and efficient system of mass processing and the manufacturing of goods and services. For this level of development to be attained, there must be a sound financial system which would serve as the back bone of such an economy. If this is pursued, acquiring industrial capabilities would be easily attained since it is considered as the economy growth and development. As a result of the importance of the financial system in developing industrial capabilities every economy seeks avenues to acquire them. One of such avenues is raising funds through the capital market.


Business firms as well as individual units often need to raise capital. On the other hand, some individuals and firms, even governments have incomes that are greater than their current expenditure, so they have funds available to invest. But only few individuals and institutions are in the position to provide all forms of financing needed for the funds investors to fund big businesses.

The financial system is a frame work within which capital formation takes place. In other words, it is the frame work within which the savings of some members of the society (surplus spending unit) are made available to other members of the society (deficit spending unit) for productive investments. It enables the speedy transfer of funds from the surplus sector of the economy for profitable investment. Put differently and clearly, the financial system provides the economy, with the allocative sector through which scattered savings of the masses in the society are first aggregated and then disaggregated among economic unit. This service is rendered through the provision of financial resources to meet the borrowing needs of individuals; business enterprise and government to facilitate investment in saving funds, also to promote a sound payment mechanism.

The financial system therefore, consists of financial institutions, financial instruments, rules and norms that facilitate and regulates the flow of funds through the macro economy. The system itself is controlled by the government through the agency of the central bank of Nigeria, which supervises the activities of financial intermediaries and monitors adherence to the government monetary and fiscal policies.

Within the financial system is the frame work called the financial market which is classified into two main categories; THE MONEY MARKET and the CAPITAL MARKET. The money market deals with short and medium term financial instruments that is readily convertible into cash and whose maturity ranges between a few days and few year, it exists primarily as a means of liquidity adjustment and includes treasury bills, treasury certificates, commercial papers etc.

On the other hand, the capital market deals with instrument or long term securities with maturity period longer than one year such as bonds, debentures and equity stocks. The capital market in Nigeria has been a major source of finance to the government, industries etc to meet their longer term capital requirements such as financing for fixed investments on buildings, plants, bridges etc. it has been in Nigeria’s existence since 1960 and has progressed steadily over the years. The use of the capital market reduces over reliance on the money market, assist in promoting a solvent and competitive financial sector as well as fostering a healthy stock market culture. The importance of the capital Market cannot be under estimated, it is the fundamental instrument of capital formation in any economy, no investment takes place in a vacuum, capital is required. A well developed capital market ensures the availability of capital funds for investment, and developing project usually takes a long gestation period which the funds from the money market cannot sustain. This implies that the absence of an efficient capital market in an economy would result in shortage of long term funds and would harm investment and hence militate against economic development.


The objectives of the capital market at any point in time are geared towards attaining an appreciable development and growth in the economy and providing a channel for engaging and mobilizing domestic savings for productive investment. Apart from its fund mobilization function, it performs intermediary role by making it possible for those who have surplus funds to be able to loan it out to does in need of it for productive purpose.

Though the Nigeria capital market has maintained an upward trend over the years, the process of allocation of funds is influenced by the regulatory role of the security market, this hinders the equitable distribution of the surplus funds to the economic units of the economy.

The problems therefore is stated thus: How do we articulate the impacts of the capital market as an essential executor of changing funds from the surplus sector to the deficit sector of the economy in other to raise long term capital to finance fixed investment and stimulate industrial sectors as well as economic development of the Nigerian economy? Though the capital market is very broad, the study may be narrowed and limited to the Nigeria stock exchange – a market that deals with the tradable securities. This study should be able to expose how the stock exchange market impacts on the growth of the Nigeria economy will be improved upon.


This study is aimed at assessing the activities of the Nigerian stock exchange market and the extent to which it has been able to achieve since it was established and the study would also investigate and ascertain some of the criticism levelled against the stock exchange. The following questions are therefore raised to guide the study;

v Does the Nigerian stock exchange have significant impact on the Nigerian economy?

v What are the possible problems and possible solutions to the problem of Nigerian capital market?

v To what extent are the fundamental recommendations that will assist policy makers to tailor economic reformation to the path of capital market?


The objective of the study is to evaluate the contribution of the Nigerian

Stock exchange to the growth of the Nigerian economy. The specific objectives are;

To examine the impact of the Nigerian stock exchange on the Nigerian economy.

To identify the possible problems and possible solutions to the problems of the Nigerian capital market.

To articulate fundamental recommendations which will assist policy makers to tailor economic reformation to the path of capital market.


According to Nwana (1998), “A hypothesis formulation is aimed at delimiting the direction of searching for evidence everywhere, anywhere, anyhow”. It is based on the above premise that the following research hypothesis is formed to guide this work.

Ho: b0 = 0 There is no significant relationship between the Nigerian stock exchange and the economic growth of the country.

H1: b1 = 0, There is a significant relationship between the Nigerian stock exchange and economic growth of the country.

H0: b0 = 0, There is no significant relationship between the capital market and Nigeria’s economic growth.

H1: b2 = 0, There is a significant relationship between the capital market and Nigeria’s economic growth.


The need of a study of this magnitude cannot be over emphasized. Little attention has been given to finding out the extent to which the Nigerian stock exchange market impacts on the Nigerian economy. The result from this study is expected to be of great importance to individuals, investors, business firms and the entire economy as a whole. It will also help to enlighten the members of the public on the meaning of stocks and shares, inculcating in them the savings and investment habit.

This research will be of significant to business firms and the government in the sense that it is going to expose the usefulness of raising funds in the Nigerian stock exchange market and other institutions in the capital market with regards to reduction in risk and involvement of the public in economic development. The study is also aimed at boosting investors to patronize the stock exchange market in other to enhance their effect on the economy. This study is also expected to identify some problems encountered in the capital market by participants and suggest possible means of rectifying them. The recommendations and findings of the study are also expected to be of great assistance to future researchers, future market participant and future policy makers.


This study covers the period between 1980 and 2009, this period is sufficient for the market to significantly impact the economic growth. The focus of the study is limited to the activities of the Nigerian stock exchange market as our anchor point. This study has no doubt encountered problems in terms of both internal and external validity. Like any other research study, this too has some limitations. The problems encountered in the case of embarking on this research are in two dimensions; finance and time.

Finance was required to enable the researcher to travel from one place to the other to obtain necessary data for the study and also to produce a readable copy. Time was also another constraint as the researcher had to apportion her limited time in ensuring the research becomes successful.

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