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The study has thus far investigated the effect government bonds on capital market growth in Nigeria. In doing this, the study has employed intensive use of theoretical, conceptual and empirical tools. The study covered a period of 37 years spanning from 1980 to 2016. The study adopted the OLS estimation technique for estimating the linear model developed in the study. The findings of this study are summarized as follows; Government bonds have a positive and significant effect on capital market growth in Nigeria. Government development stocks have a positive and significant effect on capital market growth in Nigeria. Monetary policy rate has a negative and significant effect on capital market performance in Nigeria. Based on the above findings, it is thus recommended that; Government should increase its presence in the Nigerian capital market so as to boost the performance of the capital market. It is thus concluded that government bond is a positive and significant determinate of capital market performance in Nigeria.









1.1       Background to the study

The Nigerian capital market is relatively new and has many factors influencing it. The capital market is for sourcing of long term loans, while the floating of government bonds will greatly stimulate the capital market in it’s size and activities. Also, most market started with bonds that are actually floated first.

According to SEC, (2000), the bond market is preferred as the ideal mechanism for the exchange of claims among buyers. Government bonds has interest bearings securities in the capital market and also mutual relationship with itself, thus government stock as an instrument gives the capital market room to exist.

The presence of government bonds in the Nigerian capital market can be traced to the early twentieth century (20th) and also floating of a bond in 1946 by the then colonial government. The Federal government development bonds which were formally introduced in 1959 was designed to provide long term finance for government projects and later most proceeds are leased on regular basis till 1986 when deregulation of the capital market started.

The recent challenges of the capital market in Nigeria was due to economic meltdown from 2009, according to CBN (Central Bank of Nigeria) annual report on it’s fair share on government bonds. The dismal performance of the banking sector was owing to reforms, administrative charges and others of the CBN and SEC and also counter policies within and outside the market are some factors that have inhibited the capital market as well and the impact of government bonds.

  • Statement of research problem

The secondary objective of floating government bond is to source for funds which would be loanable to state governments. Most authors on the Nigeria n capital market literature have recognized the significant impact the capital market has on the economic growth and development of Nigeria, but to some extent the capital market have under gone some challenges which include; Unstable macro-economic environment, poor system of supervision and regulation, limited range of securities, inhibited foreign capital inflow etc.

This research work attempts to ascertain if government bond has been able to influence capital market growth and economic development in Nigeria. In Nigeria, much work has not been done to empirically investigate the impact of government bonds on capital market growth in Nigeria. This is the gap in knowledge the researcher is attempting to fill.

1.3       Objectives of the study

The main objective of the study is to investigate;

  1. Examine the effect of federal government bond on growth of capital market in Nigeria.
  2. To evaluate the effect of government development stocks on the growth of capital market in Nigeria.




  • Research questions
  1. What is the effect of federal government bond on growth of capital market in Nigeria
  2. What is the effect of government development stocks on growth of capital market in Nigeria


1.5  Research hypotheses

The following research hypotheses will be tested in the course of this study:

H01:     There is no significant effect of federal government  bond on growth of capital market in Nigeria

H02:     There is no significant relationship between government development stocks and capital market growth in Nigeria.


1.6       Significance of study

  1. Government: The study will enable the government to understand when to float bonds and how to set up policies to achieve a stable macro-economic environment animal at fostering the growth of the capital market.
  2. Investors: The study will enable investors to seek for better return on their investment in fixed income securities.
  • Students and fellow researchers: This study will enable students to understand the meaning of capital market growth and government bond. Researchers can build on this research work for further study by expanding the scope of for their academic purpose.


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