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The purpose of this research work was to evaluate the performance of the Nigerian Stock Exchange (NSE) in Nigeria and the overall financial development of the economy. In the process of this research, the methodology used in achieving the findings were to extract information through the distribution of questionnaires to public in Uyo metropolis, and thereafter the data collecting was analysed effectively through chi-square statistics. The research found out that the Nigerian Stock Exchange market does not significantly provide necessary liquidity mechanism for investors, rather it was discovered that the Nigerian Stock Exchange market contributes significantly to capital formation as well as economic growth of Nigerian. Therefore this study recommend that the Nigerian Stock Exchange should relaxed on some measures such as market capitalization, volumes of trading, yearly/total new issues etc, to encourage more listening in order to boost the activities of the capital market, also in Nigeria Stock Exchange should be computerized for effective and quicker transaction. 




The determination of the overall growth of an economy depends on how efficiency the stock market performs its allocative functions of capital. As the stock market mobilizes savings, concurrently it allocates a larger proportion of it to the firms with relatively high prospects as indicated by its rate of returns and level of risk. The importance of this function is that capital resources are channeled by the mechanism of the forces of demand and supply to those firms with relatively expansion and growth (Alile, 1997). Mobilization of resources for national development has long been the central focus of development economists. As a result, the centrality of savings and investment in economic growth has been given considerable attention in the economic literatures (Rostow, 1960; Aigbothan, 1995; Demorgue-Kunt and Levine, 1996). The stock market enables governments, and industries to raise long-term capital for financing new projects, and expanding/modernizing commercial concerns. If capital resources are not provided to those economic areas, especially industries where demand is growing and which are capable of increasing production and productivity, the rate of expansion of the economy often suffers. A unique benefit of the stock market to corporate entities is the provision of long-term, non-debt financial capital.

Recent studies suggest that, stock market liquid has been a catalyst for long-term growth in developing countries. Without a liquid stock market, many profitable long-term investments would not be undertaken because savers would be reluctant to tie-up their investments for long periods of time. In contrast, a liquid equity market allows savers to sell their shares easily, thereby permitting firms to raise equity capital on favourable terms. By facilitating longer-term, more profitable investments, a liquid market improves the allocation of capital and enhances prospects for long-term economic growth.

The capital market is an organized market which provides facilities to the government and private investors to raise long-term loans to finance its expenditures and for expansion/modernization of industries. It also exists to offer platform where suppliers of capital can quickly and easily restore their liquidity. The capital market serves the purpose of capital mobilization and allocation of the nation’s capital resources among various competing alternatives uses. These vital functions for rapid economic growth and development as performance by the capital market are in consonance with the aims and objectives for establishing the Nigeria Stock Exchange (NSE) in March 1960 (as the Lagos Stock Exchange). Shares, debentures and Government bonds, collectively known as securities.

There are two markets within the NSE like other stock exchange in the world. These are:

(1)             The primary market

(2)             The secondary market

The primary market operates when the initial capital raising take place. It is also known as the New Issue Market. Through the primary market operations, the Government and Industrialists where able to raise long-term loans to finance development projects and for expansion and modernization of industries respectively. This market channel of NSE exerts enormous impact on the Nigeria’s economy. It meant that Nigeria business men and nascent industrialists could otherwise have no organized market where they could raise long-term loans for investment purposes. Subsequently, the mobilization of long-term funds for productive purposes in the economy could have been difficult without the Nigerian Stock Exchange (NSE).

The secondary market of NSE is where securities are bought and sold after its issuance in the primary market. Thus, the NSE through this market channel provide the means of restoring liquidity to investors and allowing them to spread their risks while the borrowers such as Government and Industrialists retain the funds in their investments.

Activities of the exchange through these channels provides it with the functions of mobilizing saving from the Surplus Spending Unit (SSU) of the economy and allocates them to the Deficit Spending Unit (DSU). Where greater proportion of these funds go to those investments with the highest rates of return after giving due allowance for risk. This allocative function of the NSE is crucial in determining the overall growth and efficiency of the economy.

If capital resources are not provided to those economic units where demand is growing and which are capable of increasing productivity, and at the appropriate time, the growth rate of the economy will be inevitably compromised.

The NSE thus, became the hallmark of the Nigerian capital market, hence NSE (Nigerian Stock Exchange) and capital market are often used interchangeably.


The Nigerian Stock Exchange (NSE) has not been contributing adequately as desired to the development of the economy especially with regard to investment in Nigeria. This is due to certain reasons such as:

low public awareness of finance possibilities of the Nigerian Stock Exchange market, inadequate trading floor to meet the demand of the public, poor infrastructures such as telecommunication, electricity etc to facilitate its activities, high cost of transaction, lack of venture capital and weak savings mechanism.  It is along these that efforts have been made in this study to bring to notice the validity of the Nigerian Stock Exchange over the years.


The objectives of this study are spelt out into two: general objective and specific objectives. The general objective of this study is to provide critical evaluation of the performance roles and contributions of Nigerian Stock Exchange to the growth and development of the economy. While the specific objectives are:

(i)                            To investigate the impact of the stock exchange on economic growth of Nigeria.

(ii)                         To assess the extent to which the stock exchange provides necessary liquidity mechanism for investors through a formal market for debt and equity securities.


This study examines 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.              Why are the Nigerian stock exchanges activities not made public to many individual investors as well as to companies in Nigeria?

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


Hypothesis One

Ho:   Stock exchange does not provide necessary liquidity mechanism for investors through a formal market for debt and equity securities.

H1:    Stock exchange provides necessary liquidity mechanism for investors through a formal market for debt and equity securities.

Hypothesis Two

Ho:   There is no significant relationship between stock market liquidity and economic growth.

H1:    There is a significant relationship between stock market liquidity and economic growth.

1.6                              SIGNIFICANCE OF THE STUDY

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, this research work is timely, as it is going to address the country’s economic problems, through the stock exchange rehabilitation. 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 this research work, large number of Nigerians even though having large sum of investable 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 operate their own enterprises do not know where and how to obtain additional funds to increase their operations.

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


The study is divided into five (5) chapters. Chapter one which is the general introduction of the entire study comprises the statement of the problem, objective of the study, significance of the study, hypothesis of the study and organization of the study. Chapter two covers the literature review, empirical review and theoretical background to the study. Research methodology which includes research design, method of data collection, research instrument, method of analysis is presented in chapter three. Data presentation, analysis and discussion of findings is in chapter four. Finally, chapter five presents the summary of major findings, conclusion based on major findings and recommendations.


Basically, this study covers the activities and performance of the Nigeria stock exchange (NSE) ideal with such aspects as the historical background or evolution of the stock exchange, capital formation as well as the role of the Nigerian Stock Exchange, other areas will include legal framework, members and governance operations, listing 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 print 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 bond) to pay back a loan, plus a certain rate 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

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