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This research work was embarked upon with a view to determine the impact of
the capital market on the economic growth of Nigeria. The capital market was
set up to achieve specific objectives which would boost the economy such as
encourage domestic savings and increasing the quantity and quality of
investments. The capital market offers access to a variety of financial
instruments which are very essential for government and other institutions in
need of long term funds. The data was obtained from the CBN Statistical
Bulletin (1980 – 2009) and analyzed using ordinary least square analysis. The
result 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.
Title Page i
Approval Page ii
Dedication iii
Acknowledgment iv
Abstract v
Table of Content vi
1.0 Introduction 1
1.1 Background of the Study 1
1.2 Statement of the Problem 3
1.3 Research Questions 4
1.4 Objectives of the Study 5
1.5 Hypothesis of the Study 5
1.6 Significance of the Study 5
1.7 Scope and Limitation of the Study 6
1.8 Organization of the Study 6
2.0 Literature Review 8
2.1 Theoretical and Conceptual Framework 8
2.2 Review of Related Concepts 9
2.2.1 Capital Market and Economic Growth 9
2.2.2 Definition of Capital Market 12
2.2.3 Overview of the Nigerian Capital Market 13
2.2.4 The Nigerian Security and Exchange Commission 15
2.2.5 The Nigerian Stock Exchange 17
2.2.6 Economic Growth 18
Comment [O1]: See the order in which Chapter
one should appear
1.1 Background of the study
1.2 Statement of the problem
1.3 Research questions
1.4 Objectives of the study
1.5 Hypothesis of the Study
1.6 Significance of the study
1.7 Scope of the study
2.2.7 Impact of Capital Market on Economic Growth Of Nigeria 19
2.3 Empirical Review 20
2.3.1 Empirical Review on Other Countries 21
2.3.2 Empirical Review on Nigeria 22
3.0 Methodology of Research 25
3.1 Sources of Data 25
3.2 Method of Evaluation 25
3.3 Model Specification 27
4.0 Presentation of Result and Data Analysis 28
4.1 Presentation of Regression Results: 28
4.2 Analysis of the Result 28
4.2.1 Analysis of the Reg ression Coefficients: 28
4.2.2 Analysis of the Evaluation Methods 29 Based On Economic Criteria 29 Evaluation Based On Statistical Criteria 30 Econometric Criteria (Second-Order Test) 32
4.3 Hypothesis Testing 35
5.0 Summary, Conclusion and Recommendations 36
5.1 Summary 36
5.2 Conclusion 36
5.3 Policy Recommendations 37
The capital market is a highly specialized and organized financial market
and indeed essential agent of economic growth because of its ability to facilitate
and mobilize saving and investment. To a great extent, the positive relationship
between capital accumulation real economic growths has long affirmed in
economic theories (Anyanwu, 1993).
Success in capital accumulation and mobilization for development varies among
nations, but it is largely dependent on domestic savings and inflows of foreign
capital. Therefore, to arrest the menace of the current economic downturn, effort
must be geared towards effective resources mobilization. It is in realization of
this that consideration is given to measure for the development of capital market
as an institution for the mobilization of finance from the surplus sectors to the
deficit sectors.
The development of capital market in Nigeria, as in other developing
countries has been induced by the government. Though prior to the
establishment of stock market in Nigeria, there existed some less formal market
arrangements for the operation of capital market. It was not prominent until the
visit of Mr. J. B. Lobynesion in 1959, on the invitation of the Federal
government, to advice on the role the Central Bank could play in the
development of local money and capital market. As a follow-up to this, the
government commissioned and a set up the Barback Committee to study and
make recommendations on the ways and means of establishing a stock market
in Nigeria as a formal capital market. Acting on the recommendation of the
committee, the Lagos Stock Exchange (as it was called then) was set-up in
March 1960, and in September 1961, it was incorporated under Section 2 cap
37, through the collaborative effort of Central Bank of Nigeria, the Business
Community and Industrial Development Bank (Alile &Anao, 1990). With the
establishment of the Central Bank of Nigeria in 1959 and the coming into
existence of the Lagos Stock Exchange in 1961 and Subsequently, the Nigeria
Stock Exchange by an Act in 1979, a sound foundation was laid for the
operation of the Nigerian Capital Market for trading in securities of long term
nature needed for the financing of the industrial sector and the economy at
large. After the incorporation of the Lagos Stock Exchange, it was granted
further protection under the law and its activities was placed under some sort of
control by the government, hence the passing of the Lagos Stock Exchange Act.
However, the Lagos Stock Exchange was only operational in Lagos. By the mid
70’s, the need for an efficient financial system for the whole nation was
emphasized, and a review by the government of the operations of the Lagos
Stock Exchange market was advocated. The review was carried out to take care
of the low capital formation, the huge amount of currency in circulation which
was held outside the banking system, the unsatisfactory demarcation between
the operation of Commercial Banks and the emerging class of the Merchant
Banks, and the extremely shallow depth of the capital.
In response to the problems mentioned above, the government accepted
the principle of decentralization but opted for a National Stock Exchange, which
will have branches in different parts of the country. On December 2nd 1977, the
memorandum and article of association creating the Lagos Stock Exchange was
transformed into the Nigerian Stock Exchange, with branches in Lagos,
Kaduna, Port-Harcourt, Yola and now in Federal Capital Territory (FCT) Abuja
and some other cities. The history of Nigeria Capital Market could be traced to
1946 when the British colonial administration floated a N600, 000 local loan
stock bearing interest at 3¼% for the financing of developmental projects under
the Ten-Years Plan Local Ordinance. The loan stock, which had a maturity of
10-15 years, was oversubscribed by more than N1 million, yet local
participation of the issued was terribly poor. Certainly, potential fund abound in
Nigeria, but the overriding consideration in this project is to examine the impact
of the capital market in harnessing and mobilizing these resources (fund) to
generate economic growth in the country and consequently economic
There is abundant evidence that most Nigerian businesses 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 (Demirguc-Kunt& Levine 1996).
Most recent literatures on the Nigeria capital market have recognized the
tremendous performance the market has recorded in recent times. However, the
vital role of the capital market in economic growth and development has not
been empirically investigated thereby creating a research gap in this area. This
study is undertaken to examine the contribution of the capital market in the
Nigerian economic growth and development. Aside the social and institutional
factors inhibiting the process of economic development in Nigeria, the
bottleneck created by the dearth of finance to the economy constitutes a major
setback to its development. As a result, it is necessary to evaluate the Nigerian
capital market.
This research was guided by the following research questions:

i. What is the performance of the capital market in relation to economic
growth in Nigeria?
ii. How could the capital market through its crucial role stimulate economic
growth in Nigeria?
The broad objective of this study examined the activities and performance
of Nigerian capital market. The specific objectives of the study are as follows:
1. To evaluate the performance of the capital market in relation to the
economic growth in Nigeria.
2. To make recommendations as to how the operations of the market could
be improve to boost economic growth and development of Nigeria.
The hypothesis that would be tested in the course of this research is stated
below as:
H0: That the capital market operations have no impact on Nigerian economic
The study explored the impact or effectiveness of capital market
instruments on Nigerian economic growth. Though the scope of the study was
limited to the capital market, it is hoped that the exploration of this market will
provide a broad view of the operations of the capital market. It will contribute to
existing literature on the subject matter by investigating empirically the role,
which the capital market plays in the economic growth and development of the
country. The main importance of this study is that it will provide policy
Comment [O2]: See the order in which Chapter
one should appear
1.8 Background of the study
1.9 Statement of the problem
1.10 Research questions
1.11 Objectives of the study
1.12 Hypothesis of the Study
1.13 Significance of the study
1.14 Scope of the study
recommendations to policy-makers on ways to improve operations and
activities of the capital market.
The economy is a large component with lot of diverse and sometimes
complex parts; this research work only looked at a particular part of the
economy (the financial sector). This work did not cover all the facets that make
up the financial sector, but focus only on the capital market and its activities as
it impacts on the Nigerian economic growth. The empirical investigation of the
impact of the capital market on the economic growth in Nigeria was restricted
to the period between 1980 and 2009 due to the non-availability of some
important data.
The study is divided into five (5) chapters and organized as follows:
Chapter one form the introduction part, this is where the main theme of the
research is given. It comprises of the statement of the problem, objectives of the
study, research questions and hypotheses, significance of the study, scope and
delimitation of the study and organization of the study.
Chapter two is the literature review of the impact of capital market on the
economic growth of Nigeria.
Chapter three forms the research methodology which includes sources of data,
method of data analysis and model specification.
Chapter four is the data analysis while chapter five includes the summary,
conclusion and recommendations


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