Our Blog

List of recently published project topics and materials





1.1     Background of the Study

The Nigerian capital market played an indispensable role in Nigeria’s economy by providing funds for the investors without inconveniencing the companies and an essential agent of economic growth because of its ability to facilitate and mobilize savings and investments. The capital market can be an important facilitator of economic growth (Applegarth, 2004). The capital market is a network of specialized financial institutions, series of mechanisms, processes and infrastructures that in various ways facilitate the bringing together of suppliers and users of medium to long-term capital for investment in socio-economic developmental projects (AL-faki; 2006). The development o capital market in Nigeria, as in the developing countries has been induced by the government.

The Nigerian economy has over the years been subjected to series of social, political and economic policies and reforms. In the pre-1970 era, the economy was basically agrarian and food security was largely achieved with the various regional governments then. The need to encourage private capital in development was realized long enough, with the establishment of the Nigerian Stock exchange (NSE), The NSE started in 1961 as a result of the recommendation of Barback committee announcement in 1958 to consider the ways ad means of fostering the development of a Nigeria capital market.

The Lagos exchange was registered on March 1st, 1958 incorporated on 5th June, 1981. It was transformed to industrial enterprises panel in 1976 and supported by the view of the committee on the Nigerian finance system to take care of the low capital formation and to mop-up the huge amount of currency in circulation which was held outside the banking system. The NSE has its branches now in Onitsha, Kaduna, Kano, Ibadan, Benin, Uyo, Ilorin, Port-Harcourt, Yola, Federal Capital Territory (FCT) Abuja, Owerri, Bauchi, Abeokuta and its head quarter in Lagos.

The capital market is subdivided into primary and secondary markets. The primary market or the new issues market provides the avenue through which government and corporate bodies raise fresh funds through the issuance of securities which is subscribed to by the public or s selected group of investors. The secondary market enables trading in existing securities that is securities previously issued in the primary market (SEC, 2013).

The secondary market securities, according to sale and Momoh (2009) found that the secondary market activities have impacted more on Nigeria per capital income by tending to grow stock market canings through wealth than the primary market. Aremu et al. (2011) and Donwa and Odia (2011) argued that the capital market has been indentified as an institution which contributes to the socio-economic growth and development of emerging and developed economics.

This is made possible by the intermediary role played by the capital market in mobilizing funds from surplus units to deficits units to be invested into projects with positive Net Present value (NPV) which may enhance economic growth of the nation. Economic development is regarded as the major goal of national policy in any economy, while capital accumulation or formation is also seen as potent factor in the process of economic development.

It is regarded as the core process by which all other aspect of growth is made possible and feasible. However, the rate of economic development is always limited by shortage of productive factor and if any scarce factor associated with development should be singled out (Oke and Adeusi 2012). They brought out that a major engine of economic growth and development of a nation is its capital.

It impacts positively on the economy by providing financial resources through its intermediation process for the financing of long term projects. The projects could be promoted by government or private sector institutions. They are usually in such areas as: infrastructure, agriculture, solid minerals, manufacturing, banking and other financial services and other real sectors areas, hence without an efficient capital market; the economy may be starved of the required long-term fund for sustainable growth.


1.2     Statement of the Problem

There is abundant evidence that most Nigerian business lack long-term capital. The business sector has depended mainly on short-term financing such as overdrafts to finance even long-term capital. Based on the maturity matching concept, such financing is risky. All such firms need to raise an appropriate mix of short and long term capital. Most recent literatures on the Nigeria capital market have recognized the tremendous performance the market has recorded in recent times.

But the performance of the capital markets especially the Nigerian stock market was overcast in 2009 by the global financial and economic crisis with the exorbitant lending rate mounting pressure on the stock market as a result of massive borrowed fund in the market. The rush by stock investors to liquidate their investment to repay their loans in order to avoid the excessive lending rate caused the Nigerian stock market to crash.

However, sere-Ejembi (2008) argued that it was not the global financial crisis and the speculative subprime mortgage bubbles and bust alone that was responsible for the crash of the stock market, other contributory factors lent support. Some of these include: Margin lending by the Deposited Bank (DMBs), stock prince appreciation that had no correlation with the fundamentals in the quoting companies and local investors opting to invest in foreign capital markets to take advantages of the low stock prices.

1.3     Objective of the Study

          This research was guided by the following research questions:

  1. Is there any long-run relationship between capital market and economic growth in Nigeria?
  2. Does capital market have significant impact on Nigeria’s economic growth?

1.4     Research Questions

  1. To determine the long run relationship between capital market and economic growth in Nigeria.
  2. To evaluate the impact of capital on Nigeria’s economic growth?

1.5     Hypothesis of the Study

The following null hypothesis that would be tested in the study is stated below:

Hypothesis I:

H0:     There is no long run relationship between capital market variables and economic growth in Nigeria.

H1:     There is long run relationship between capital market variables and economic growth in Nigeria.

Hypothesis II:

H0:     Capital market operations do not significantly impact on the Nigeria’s economic growth.         

H1:     Capital market operations do significantly impact on the Nigeria’s economic growth.

1.6     Significant of the Study

The study explored the impact or effectiveness of capital market instrument on Nigeria economic growth. It will contribute to existing literature on the subject matter by investigation empirically the role which the capital market plays in the Nigerian economy and as well its development to the country from 1981 to 2012. The main importance of this study is that it will provide policy recommendations to policy makers on ways to improve operations and activities of the capital market.

1.7     Scope and Limitation of the Study

The economy is a large component with lot of diverse and sometimes complex parts, this research work only look at a particular part of the economy (which is the financial sector). This work did not cover the entire fact that make up the financial sector, but focuses only on the capital market and its activities as it impact on the Nigerian economy. The empirical investigation of the impact of the capital market on the Nigerian economy was restricted to the period between 1981 and 2012 due to the researcher includes the combination of school activities with project work and insufficient fund.


Was the material helpful? Comment below. Need the material? Call 08060755653.