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Nigeria has a formal and active capital market. Before 1961, nearly all formal savings and deposits went through the banking system while the then colonial masters invested major capital balances for the country on the London stock exchange. However, following the establishment of the CENTRAL BANK OF NIGERIA in 1959, it was logical to have a stock exchange in 1960, which commenced operations in 1961. Thus, the foundation was ordered for the operations of the Nigerian capital market. The capital market tends to provide a forum for the interaction of the economic surplus and economic deficits to attract business under a highly regulated environment.

Earlier in 1959, the Central Bank of Nigeria had floated the first Nigerian     development loan stock, which was listed overseas. Subsequent issues in 1961 and thereafter were listed on the new local exchange.

The Nigerian stock exchange is a private, non-profit making organization limited by guarantee. It was incorporated via the inspiration and support of businessmen and the federal government through the CBN, owned by about 300 members. The membership includes financial institutions, stockbrokers and individual Nigerian of high integrity who have contributed to the development of the stock market and the Nigerian economy. The council members (Board of Director) of the stock exchange are elected at apiece annual general meeting by members of the exchange. The tenure of the presidency is limited to one three-year term. The council is responsible for policy-making but the Director -General (formerly Prof. Ndi Okereke Onyiuke , Emmanuel Ikhazobor) and presently at the time of this research, Dr. Oscar Onyema and his team of executives administer the day to day affairs of the exchange. The council members, management and staff of the Nigerian stock exchange as well as stockbrokers are subject to a stringent regime of codes of conduct, which calls for a higher degree of integrity, discipline, skill and high sense of patriotism.

Dealing members of the stock exchange are the stock broking firms licensed by the exchange to purchase and sell shares on behalf of the investing public. There are over 200 of them at the moment.

The exchange is a Self-Regulatory Organization (SRO), making and enforcing rules for its members. In 1977, the exchange was reorganized and renamed “The Nigerian Stock Exchange (NSE)”. Today, the NSE has 10 functional trading floors in different parts of the country, namely; Lagos, Abuja, Kaduna, Port Harcourt, Kano, Onitsha, Ibadan, Yola, Benin, Uyo and Ilorin.

  • Evolution of the Nigerian Capital Market

The Nigerian capital market was established in 1960 and became open for operation in 1961. However, the  evolution of the Nigerian capital market can be traced to as far back as 1946 when the government floated a N600,000 (1.25%  of  Government stock as part of the Nigerian Ten-Year plan embarked on to help raise funds from the London Stock Exchange.

In May 1959, the Central Bank of Nigeria (CBN) in pursuance of its role with respect to the development a capital market floated the first federation of Nigerian development loan of N4million on behalf of the government. Due to non-existence of  a formal securities market then, the CBN had to ensure that the stacks carried with them reasonable assurance of marketability by introducing a central register for matching buyers and sellers of shares and suggesting prices at which the deals took place.

Following the favorable report of the Barback committee, whose recommendation led to the registration of “The Lagos Stock Exchange” in March, 1960. This was subsequently followed by its incorporation under Section 2 Cap 7 on the 15th September, 1960. Trading however commenced formally on June 5 1961 after the enactment of Lagos Stock Exchange (LSE) Act of 1961.

Some catalytic institutions were established between 1959 and 1965. These institutions are namely; Investment Company of Nigeria (ICON) ltd, Nigeria Acceptance ltd (now NAL merchant Bank), and Nigeria Stock Brokers ltd.

The establishment of the above institutions gave rise to the need for the orderly development of the capital market by regulating the time at which the issues were brought to the market. This necessitated the setting up of the Capital Issues Committee, an adhoc body with no legal backing under the CBN in 1962. Trading at that period was however very low because of predominant lack of awareness of the mechanics of stock exchange transactions and poor communication. An evidence of the prevailing inertia in the stock exchange market at the time is the fact that between 1962- 1970, the exchange handled only four new issues of industrial securities. Issues of federal government were once a year and annual turnover rarely exceeded N15m of which government stock accounted for over 90%.

The market however experienced a significant growth with the implementation of the Nigerian Enterprises Promotion Decree of 1972 and 1977. The companies that complied with these decrees through the Nigerian stock market boosted equity listing such that by the end of 1980, a total of 91 companies were listed on the exchange.

In 1973, the government promulgated the Capital Issues Commission (CIC) Decree of 1973 to give legal backing and more power to the commission in place of the capital issues committee so as to enhance the implementation of the Nigeria Enterprises Promotion Decree (NEPD).

However, the CIC continued to operate as a department in the CBN but had the function of determining the price, timing, and the amount of offers for sale or subscription as set up by the Financial System Review Committee headed by Dr. Pius Okigbo (the then Economic Adviser to the federal government).

“Taking  into account the historical development of the Financial System in Nigeria ;its evolution and impact on socio-economic and political development of an egalitarian society, the Financial System Review Committee was charged with the following terms of reference:

  1. To examine the adequacy, relevance or otherwise of the institution and the structure of the financial system to meet the needs of the economy for rapid economic development.
  2. To examine the organizational and ownership structures of institutions in the system and evaluate their viability in the context of the stated preamble, the economy’s future domestic and international requirements and development trends.
  • To study operational trends in the system with particular reference to promotional activities of the financial institutions generally.
  1. To make recommendations in the light of their findings in respect of (1) and above all.
  2. Any other matters or issues which the committee in its own judgment deems relevant and helpful in the successful discharge of their task”.


Dr. P. C Okigbo’s committee among other things recommended the following:

  1. Facilitate effective management of the economy
  2. Provide non-inflationary support for the economy
  • Ensure that no viable project is frustrated singly for lack of fund
  1. Achieve greater mobilization of savings and its efficient and effective channeling
  2. Insulate the economy as much as possible and as much as desirable from the vicissitudes of the international economic scene.
  3. The establishment of a Securities and Exchange Commission (SEC) to replace Capital Issues Commission (CIC) and the establishment of additional stock exchange. This resulted to the establishment of trading floors at Kaduna, Port Harcourt and the Lagos Stock Exchange (LSE) that was later redesigned the Nigerian Stock Exchange (NSE).



This research work is concerned with the reasons why the Nigerian Stock Exchange has not made the much desired impact on the economy of this country as designed by the decree establishing it. It will also evaluate the impact of the market with a view to finding solutions to the following problems:

  • How can the desired awareness and confidence be instilled on this market?
  • How can the functions and roles of this market in facilitating the growth of the economy be achieved?
  • How can this market be developed to meet international standard?

At the Nigerian Stock Exchange (NSE), buyers and sellers are the same people. To ensure sound economic development, trading on the exchange has to be extensive. This is because an enduring economic development cannot be achieved if the market is not properly developed. The market and its operators must be seen creating the economic impact and confidence that will enhance the capacity of the market.



The study has the main specific objective which is to ascertain the impact of the capital market on the Nigerian economy and to appraise the awareness or otherwise of the existence of the stock market by showing its impact in the business world. Other specific objectives were raised:

  1. To determine the relationship between the capital market and Nigerian Economy;
  2. To determine or rather to evaluate if the deficiencies of the market affect Nigerian Economy;
  3. To establish the effect of the Nigerian stock exchange crisis on Nigerian capital market;
  4. To ascertain if there are challenges of the Nigerian stock exchange in developing the capital market;
  5. To determine the role of capital market in developing the Nigerian Economy.

          To achieve the above objectives, the following research questions were raised:

  1. Is there relationship between capital market and Nigerian Economy?
  2. How do the deficiencies of the Nigerian stock exchange affect the Nigerian economy?
  3. How does the crisis in the Nigerian stock exchange affect Nigerian Capital market?
  4. What are the challenges of the Nigerian stock exchange in developing the capital market?

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