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The stock market is a common feature of a modern market economy and it is reputed to perform necessary functions, which promote the growth and development of an economy. This study examined whether the capital market reforms so far carried out in Nigeria have impacted significantly on the performance of the Nigerian Capital Market. To achieve this objective, ordinary least square regression (OLS) was employed using the data of capital market activities from 1988 to 2007. The result indicated that there is a significant difference in the performance of the capital market before and after the reform. This was achieved using the performance indicators which included the market capitalization, volume of stocks traded, value of stocks and the share index. The result showed that the indicators used increased faster in the post reform period than the pre reform period. The result of the study which established positive impact suggest that; government and stakeholders should strengthen the regulation and transparency in all the deals in the market as this will boast and attract more private participation in the market with its overall growth of both the market and the economy. And also, the NSE should find means of cutting down cost of raising fund on the exchange so as to allow more companies the opportunity of accessing fund from the exchange.




Mobilization of resources for national development has long been the central focus of economic development. For sustainable growth and development, funds must be effectively mobilized and optimally allocated to enable business and the national economies to harness their resources both human and material for optimal output (Tokunbo, 2002).

The capital market is an economic institution which promotes efficiency in resource allocation and capital formation. It enables both corporate organizations and governments to raise long term funds for financing new projects, as well as for project expansion and modernization (Onosode, 1990).

According to Alabede (2004) the role played by the stock market in the economic growth and development of a nation is recognized the world


over. Through that role long term funds are not only mobilized but channeled for productive investments.

The stock market provides the fulcrum for capital market activities and it is often cited as a barometer of business direction. According to Obadan (1998), an active stock market may be relied upon to indicate changes in general economic activities as mirrored by the stock market index.

The indispensable nature of the capital market in any economy arises from the two major functions it performs: - mobilizing and channeling of long term investible funds from the surplus sector to the deficit sector of the economy, Usman, (1998).

As a result of this role, governments place due emphasis on the regulation and control of the capital market in general and the stock market in particular. In recent times, there has been growing concern over the role of the stock market in economic growth; hence the market has been the focus of economists and policy makers.


According to Anyanwu (1993), the financial market is a complex mechanism made up of procedures, instruments and institutions through which deficit economic units and the surplus economic unit are brought together to transact business with one another. In his own contribution; Ibenta (2000), defined the financial market as a network of institutional arrangements through which financial resources accumulated by savers of funds are transferred to ultimate users who may be individuals or households, corporate bodies or governments for investment in economic activities, which include both the production and distribution of goods and services.

Ever since government policy began shifting in the direction of limiting the role of the public sector in business activity, the need for reform of the capital market became a critical requirement for creating a viable private sector. The need for promoting balanced financial intermediation in a system significantly short of long term funds has been a strong signal that the domestic capital market in Nigeria was overripe for a major change (Uzor, 2007).


The financial market has two major segments namely the money and capital markets. Ekoko (2007) describes the financial market as a “market where institutions exchange financial assets and liabilities through a process described as intermediation”.

The securities market comprises of two segments – the primary market and the secondary market. The primary market deals with new issues such as initial public offers (IPO), right issues, private placement and offers for sale. The secondary market on the other hand enables trading in existing securities i.e. securities previously issued in the primary market.

Prior to 1998, activities in these two markets were manually executed. Manual allotment of shares was carried out by issuing houses in the primary market subject to clearance by SEC while in the secondary market; trades were characterized by auction/open outcry by stockbrokers on the floor of the Nigerian Stock Exchange.

From 1998, the Federal Government embarked on reforms in various sectors of the Nigerian economy including the Nigerian capital market.


The commencement of Automated Stock Market trading in 1999 marked a watershed in the development of the Nigerian capital market. In that year, the Nigerian Stock Exchange established a subsidiary company called the Central Security Clearing System (CSCS) to handle the clearing and settlement of transactions in the stock market. And subsequently in the same year the exchange commenced electronic transaction in securities.

The Automated Trading System (ATS) alongside the CSCS trading engine has now reduced transaction period to T+3 (i.e. transaction day plus three days) from an average period of three months before the introduction of these measures. This implies debiting a buyer’s account within three days after the transaction, while the seller is enabled to collect his/her cheque within the same period (T+3).

The primary market has also come of age with the introduction of el

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