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The Nigerian stock exchange which started as the Lagos stock exchange Act of 1961, following the report of the Bare back committee, set up May 1958, by the Federal Government, to advice on ways and means of fastening a share market in Nigeria.The Lagos stock exchange was sequentially incorporated on the 15thSeptember, 1960. But began operations on the 2nd December, 1977 transformed into the Nigerian stock exchange with branches now in Kaduna, Port-Harcourt, Ibadan and Onitsha.Presently, there are six branches of Nigeria stock exchange with each branch having a trading floor. The branch in Lagos was opened in 1961, Kaduna 1978, Kano 1989, Onitsha 1990, Ibadan August 1990 and Port-Harcourt 1980. Lagos is the head office of the exchange. Besides Abuja is now included 2001. on the other hand, the Nigerian stock exchange started only with 19 (nineteen) securities and traded on it’s floors in 1961, now has 257 securities made up of 36 Federal government stock, 62 cooperatives or industrial loans and debentures) preference stocks and 159 equity/ stock of companies, all was a total market capitalization of approximately N3 half billion.

During the early years, trading was however, low due to the slow ratio of capital formation, lack of awareness of mechanics of stock exchange transaction and poor communication facilities.

However, with the implementation of the Nigeria enterprises promotion Decree, listing was booted and by 1980, the exchange registered a total of 91 firms. The market capital of equities only has grown to over N59, 924 billion. There are 48 listed firms whose stock are traced on the floor of the exchange, all grouped by sub-sectors.

The idea of a stock exchange for Nigeria came into being from the report of Professor R.H. Darback committee published in 1950 which recommended as follows.

1.          The creation of facilities for dealing in shares.

2.          The establishment of rules regulating transfers.

3.          Measures to encourage savings and issues of securities of government and other organization.

This report was accepted by the federal government and in September 1960, the Lagos stock exchange was incorporated as a non-profit making organization through the combination of effort from the following.

1.          Central bank of Nigeria

2.          Nigerian Industrial Development

3.          The Federal Government

4.          Nigeria business community.

The subscribers to the memorandum and Article of association of the Lagos stock exchange at the time of incorporation include:

1.          AlhajiShehuBakar

2.          Chief Theophilus Adebayo Doherty

3.          Sir OdumegunOgukwu

4.          MrAkintola Williams

5.          C.Y. Boneings and Co. Nigeria Limited

6.          John Holt Nigeria Limited

7.          The Investment Company of Nigeria Limited.


The Nigerian exchange market was supposed to have contributed greatly to the development of Nigerian economy in many arrears. But the unawareness of the public on the instrument that the traded by the stock exchange posses a huge problem to the Nigerian economy. The number of people that make use of the service of the stock exchange market in Nigerian is too slow.Additionally, most people are not abreast of the duties and responsibilities of the stockers and brokers. These two bodies play a role in the transaction of the stock exchange market in Nigeria. Since their duties and responsibilities are not properly known, these tend to present problem to the exchange.

Lastly, the Nigerian stock exchange is not fully financed by the Federal government and as a result, the exchange does not have adequate capital or fund to meet its – obligations. The encouragement and incentives which they received from the Federal government is nothing to write home about.

Therefore, this study will analyze in details the contribution of the Nigerian stock exchange to the Nigerian economy.


The study is being undertaken with various specific objectives in mind, some of which includes:

i.                             To examine the activities and the performance of the Nigerian Stock Exchange (NSE) in facilitating investment in Nigerian.

ii.                            To identify the contributions of the stock exchange in the development process of the Nigerian economic activities.

iii.                          To assess the major problems facing the stock exchange and as against its performance.

iv.                          To recommend measures to be taken to tackle the problems of the stock exchange based on the findings.

v.                           To bring to notice the anticipating impact of the stock exchanges i.e. the central securities clearing system (CSC).

The findings from the study is hoped to assist policy markets to take appropriate action or decision towards improving the activities of the stock exchange as well as in curbing the problem facing the exchange.


This study will examine the activities and performance of the Nigerian stock exchange with the aim of finding out the extent to which it has contributed to the development of the Nigerian economy especially in facilitating investments opportunities. The following questions are therefore raised to guide the study.

i.                             To what extent has the stock exchange provides necessary liquidity mechanism for investors through a formal market for debt and equity securities?

ii.                            To what extent has the stock exchange contributed to capital formation as well as gross domestic product (GDP) in the Nigeria economy?

iii.                          How true is the allegation that the Nigerian stock exchanges activities are note made public to many individual investors as well as to companies in Nigerian?

iv.                          To what extent has the policy of expanding the geographical coverage of the stock exchange activities been successful?

1.2      Research Hypothesis

H0: The market capitalization of the Nigerian Stock Exchange does not contribute to the growth of the financial system and the development of the Nigerian Economy.

H1: The market capitalization of the Nigerian Stock Exchange contributes to the growth of the financial system and the development of the Nigerian Economy.


It is a widely held view among economists and financial scholars that the economic growth and development of any economy depends on the level of capital formation of that economy. Nigeria’s low level of economic advancement has largely been attributed to the inability of the Nigerian Stock Exchange to mobilize and allocate the much needed investable capital efficiently.

Therefore, any research efforts in these directions will contribute immensely in addressing the country’s economic problems. The findings of this research could be of tremendous benefit to policy maker particularly in the current effort to sensitize the capital market support it and make it viable as well as international standard.

The economy and the investing public could also benefit significantly from the result of the investigation, large number of Nigerians even though having large sum of investigable funds, are either completely ignorant or are not well informed about the operation of the stock exchange. This unfortunate state of affairs is responsible for the large size of money outside the financial system and consequently, the low level of investment in the economy, on the other hand many Nigerians who are ready to operating their own enterprises they do no know were and how to obtain additional funds to increase their operations.

The research work is also intent to help reverse the trend by providing necessary information about the activities of the StockExchange to the public especially the investing public.


Basically, this study will cover the perception of staff of First Bank Okpara Avenue of the activities and performance of the Nigeria stock exchange (NSE) ideal with such aspect as the historical background or evolution of the stock exchange, capital formation as well as the role of the Nigerian Stock Exchange others areas will include legal framework, members and governance operations, listings requirement and instrument listed on the stock exchange.


The relevant terms which are used in this research work that may be new to the reader are defined or explained below.

a.     Security: These are written document or prints financial documents by which the claims of a holder in specific properties are secured; they could be share, bounds and debentures traded on the stock exchange.

b.     Stock and shares: They are instrument representing partial ownership interest in a business enterprise. The enterprise entitle the holder to a proportional right over the profit known as dividend.

c.     Bond and debenture: they are kinds of securities. They are legal documents representing a promise by the company or by government (in case of bound0 to pay back a loan, plus a certain of interest over a specific period of time.

d.     Investment: The spending of money for purposes other than consumption in order to earn income from it or to realize a capital gain at a later date. It includes the purchase of stock exchange securities, government stock, life insurance and policies.

e.     Stock exchange: A stock exchange is an organized market were large and small investors alike buy and sell stock through stockbrokers, the stock and share of companies and government agencies.

f.      Stockbroker: A firm or a person who buy and sell securities on behalf of investors for a commission called brokerage. The commission exchange regulated by the stock exchange.

g.     Jobbers: These are dealers engaged in whole-selling of securities on a stock exchange market but do not deal with public, they only deal with the brokers and other jobbers.

h.     Listing/quotation: Listing is an omission in to official list of exchange. To be listed is synonymous with the word “to be quoted” and this entitled the securities to be quoted on the exchange.

i.      Registrar: A registrar is a common place it is where records in respect to quoted stocks and shares are kept.

j.      Unit trust: This is an instrument whereby people pool their subscription together under a trust deed. The scheme involves on one hand, a managing and on the other hand a trustee, which is usually a company, very often a bank or insurance company.

k.     Cum-Dividend: This is sometimes written as “co’ and it means that shares are transferred with dividends.

l.      Ex-dividend or “XD”: It is a financial expression for without dividend. A declared in that period for its new owner(s).

m.    Market capitalization: The value of a firm as determined by the market place of its issued and outstanding common stock.

n.     Central securities clearing system (CSCS): This is a computerized subsidiary company of the Nigeria Stock Exchange (NSE) put in place to expedite the settlement delivery and custodian traded in the stock exchange. The CSCS was commissioned and commence full operation on 8th and 14th April 1997 respectively.

o.     Secondary market: The market in which stock is traded after being issued in a primary market.

p.     Primary market: This is the market for initial offer of securities as when a company makes its initial contact with the public in search of public fund, initial corporate capital or additional by already existing or quoted company.

q.     Second tier securities market: This is the market where small and medium scale companies have their shares listed on daily basis.

r.      Common stock: Equity securities having last cliam or residual assets and earning of a corporation.

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