Economics Project Topics

Role of Capital Market in Industrial Growth and Development in Nigeria

Role of Capital Market in Industrial Growth and Development in Nigeria

Role of Capital Market in Industrial Growth and Development in Nigeria

Chapter One

Objectives of the Study

The broad objective of this study is to critically appraise the contribution of capital market towards the development of the industrial sector of Nigerian’s economy, and how investors have utilized the opportunity provided by the capital market to boost industrial activities in the country.

The specific objectives of the study include to:

  1. determine the impact of  Nigeria Annual Market Capitalization on the Gross Domestic Product  (GDP) of the industrial sector. ii.  examine the extent to which value of traded securities  impact  on the Gross Domestic Product (GDP)  of the industrial sector.
  2. ascertain the extent to which industrial loans are made available to users by the Nigeria Stock Exchange.
  3. ascertain the role of capital market indices on average capacity utilization rate of the Nigeria manufacturing sector.




This part of this work discusses the relevant literature related to the study of the role of capital market in industrial growth and development of Nigeria between 2000 to 2015.  This section of the study accounts on the works that has been published on similar topic by accredited scholars and their findings. The chapter is divided into three parts. The first part shall dwell on the conceptual frameworks on capital market and industrialization. The second part shall dwell on theoretical framework that is related theories like capital asset pricing model, Portfolio theory and many others and the third part which is empirical evidences dwells on studies carried out by other researchers in relation to the current study under review and finally the summary of the related literature.

 Conceptual Framework

Concept of Capital Market

Many African countries have invested in developing domestic capital markets as institutions for mobilizing external capital inflow and domestic savings. The development of domestic capital market provides opportunity for greater funds mobilization, improved efficiency in resources allocation and provision of relevant information for investment appraisal. The capital market has been identified as an institution that contributes to the socio-economic growth and development of emerging and developed countries (economies). This is made possible through its vital role in intermediation process in those economies (Oke & Adeusi, 2011).  Capital market is a market that provides facilities for mobilizing and dealing in medium and long term funds. The players on the capital market are the operators who act as intermediaries between the providers of the funds and the fund users. They include; Securities and Exchanges Commission, Brokers/Dealers, issuing Houses, Registrars and Investment Advisors.

Osaze (2000), sees the capital market as the driver of any economy to growth and development because it is essential for the long term growth capital formation. Capital market is defined as the market where medium and long term finance can be raised (Akingbohungbe, 1996). Capital market offers a variety of financial instruments that enables economic agents to pool, price and exchange risk (Kolapo & Adaramola, 2012). According to Ogbulu (2009), the capital market is a network of special institutions that in various ways bring together suppliers and users of capital. In another exposition, Ekezie (2002), notes that capital market is the market for dealings (that is lending and borrowing) in longer term loan-able funds.

The development of the capital market and apparently the stock market provides opportunities for greater funds mobilization, improved efficiency in resources allocation and provision of relevant information for appraisal (Inanga & Emenuga, 1997).

Osamwonyi (2005), sees capital market as an exchange system set up to deal in long term credit instrument of high quality. The dealing in this high quality instrument facilitates the execution of some desirable and profitable project bearing direct relationship with economic development. Nwankwo (1991), agrees that capital market offers a variety of financial instruments that enables economic agents to pool, price and exchange risk. Through assets with attractive yields, liquidity and risk characteristics, it encourages saving in financial form. This is very essential for government and other institutions in need of long term funds and for suppliers of long term funds. Based on the relevance of capital in accelerating economic growth and development, government of most nations tends to have keen interest in the performance of its capital market. The concern is for a sustained confidence in the market and for a strong investor’s protection arrangement. In Nigeria, Securities and Exchange Commission (SEC) is the government agency responsible for developing and regulating the Nigeria Capital Market. It was created by Act No 71 of 1979 and renamed as Securities and Exchange Commission Decree No.29 1988. The SEC pursues its objectives by registering all market operators based on capital adequacy, competence and solvency as criteria.





This chapter dealt with the research design, sources of data, population, sample size, model specification and techniques of data analysis.

Research Design

This research employs ex-post facto research design. Ex-post facto research design according to Osuagwu (1999), is the type of research involving events that have already taken place. Data already exist as no attempt is made to control or manipulate relevant independent variables.

 Sources of Data

The data for this study was obtained mainly from secondary sources particularly from Central Bank of Nigeria (CBN) Statistical Bulletin, Nigeria Stock Exchange (NSE) Fact books, Annual Report and Account of Nigeria Stock Exchange and Annual Report and Account of the Securities and Exchange Commission for a period of sixteen years from 2000 to 2015. Specifically, the data collected includes market capitalization of the industrial sector, Value of traded securities of the industrial sector, Industrial loan of the NSE, Average manufacturing capacity utilization rate, Inflation rate, and Real Gross Domestic Product (GDP) of the industrial sector.


For the purpose of this study, the entire industrial sector’s real Gross Domestic Product (GDP), Industrial Loan and average capacity utilization rate of the manufacturing sector as obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin was used in aggregate as against the individual companies that makes up the industrial sector for a period of 16 years from 2000 to 2015. It is worthy to note that, some companies whose Gross Domestic Product and average capacity utilization rate were included in the study may have been delisted and new ones listed during the stated period of review. (See appendix 1).




This chapter tested and analyzed the data generated for this work, which comprises the independent variable, dependent variable as well as the control variable. The variables used to measure the role of capital market in industrial growth and development of Nigeria includes Gross Domestic Product of the industrial sector, industrial loan, average capacity utilization rate, inflation rate, annual market capitalization and value of traded securities of the industrial sector.

First, the data obtained from Central Bank of Nigeria Statistical Bulletin, Nigeria Stock Exchange Fact books and annual reports and accounts are presented in a tabular form as shown in table 4.2.1 – 4.2.4 below, followed by simple and multiple regression analysis to see the association between Capital market indices and all the dependent variables.



Summary of Findings

This study examined the role of capital market in industrial growth and development of Nigeria. Capital market indices was proxied by total annual market capitalization, value of traded securities and inflation rate while industrial development indices  was proxied by real gross domestic product of the industrial sector, industrial loan from Nigeria Stock exchange transactions and average manufacturing capacity utilization rate. To achieve this, both linear and multiple regression analysis was employed to analyze the four (4) hypothesis as set in our objective and the result showed the following; v that there was a positive and significant impact of  annual market capitalization on the real gross domestic of the industrial sector; v secondly, value of traded securities  has positive and significant impact on the real gross domestic product of the industrial sector ; v thirdly, value of traded securities has positive and non significant impact on industrial loan while annual market capitalization has negative and insignificant impact on industrial loan  and ; v finally, value of traded securities and inflation rate has positive effect on average capacity utilization rate of the manufacturing sector, while annual market capitalization has a negative impact on the average capacity utilization rate but none impacted significantly.


Hence from the summary above this study conforms with the position of Ewal et al  (2009) and Kwode (2014), in their different studies that capital market in Nigeria has the potential of growth inducing but it has not contributed meaningfully to economic growth and development due to weak corporate governance, unstable macroeconomic environment, sharp practices by capital market operators, low absorptive capitalization, illiquidity among others. Above all, the dismal performance of the entire industrial sector may be attributed to inadequate power supply and infrastructure constraint. Hence we conclude by urging the government and stakeholders to leverage the capital market so as to fuel entrepreneurship, support the real sector, and create job which will bring about the desired multiplier effects for sustainable economic growth.


In the light of the above, the study thus recommends the following:

  • there is urgent need to restore confidence to the market by regulatory authorities through ensuring transparency, fair trading transaction and dealings in the stock exchange. The Security and Exchange Commission (SEC) to be more active and effective in its regulatory and developmental capacities. SEC should ensure effective supervision and monitoring of all institutions and activities in the capital market.
  • the listing requirement at the Stock Exchange should be made a little flexible in order to avail Medium and Small Scale industries the opportunity to get listed without compromising the Exchange standard in order to give room for wider participation.
  • there is also need for an increased investment in instrument  such as derivatives, convertibles, futures, swap and options in the market. vencourage the participation of more private limited liability companies and informal sector operators to access the market for fresh capital.
  • government should ensure an investment friendly environment by putting in place the required infrastructures and policy reforms that is necessary to enable the Nigerian capital market effectively and efficiently mobilize long-term financial resources and channel same to the industrial sector of the economy.
  • the general public needs to be enlighten through public awareness campaign by the regulatory authorities in order to improve the activities of the market and in turn an increase in their transactions. vfinally, Foreign investors should be encouraged to participate in the market in order to improve market capitalization.

 Suggestion for Further Research  

This study has effectively evaluated the role of capital market in developing the industrial sector in terms of the finance available for industrialist in expansion and growth of their business.

Hence attempt should be made by other researchers to explore the subject deeper in terms of other factors that could contribute to the development of the industrial sector. Last but not the least, a study on how the bank of industry can finance the industrial sector towards growth and development, the impact of high operational cost on the profitability of the industrial sector could be another pioneering research area.


  • Abdulkadir, A. (1981). Financing Industrial Development in Nigeria. Business Times Newspaper. May 4.pp16.
  • Adamu, J.A., & Sanni. I (2005). Stock Market Development and Nigerian Economic Growth. Journal of Economic and Allied Field 2(2), 116-132.
  • Afees, A.S., & Kazeem, B.A (2010). The Stock Market and Economic Growth in Nigeria: An Empirical Investigation, Journal of Economic Theory, 4, 65-70.
  • Agarwal, S. (2001). Stock Market Development and Economic Growth: Preliminary Evidence from African Countries, Web Document. Retrieved 28th June, 2014.
  • Akingboungbe, S.S. (1996). The Role of the Financial System in the Development of the Nigeria Economy. Paper presented at a workshop organized by the Centre for Africa Law and Development Studies.
  • Alaw i ye- A d a m s, A. A, . & B ab atu nd e, A. (2 0 1 3 ) . T he I nef fe ct i ve ne ss o f t he Nigerian Capital Market in Fulfilling its Expected Role in Economic Growth and Development in Nigeria,
  • Al-Faki, M. (2006). The Nigeria Capital Market and socio-economic Development. Paper presented at a Distinguished Faculty of Social Science Public lecture, University of Benin, 26:9-16
  • Al-Faki, M. (2007). Capital Market Reforms and Real Sector Financing: What Option? SEC News.4 (1), October
  • Arnold, G. (2005). Corporate financial management (3.ed.). Harlow [u.a.]: Financial Times/Prentice Hall. p. 354.
  • Ariyo A., & Adelegan O. (2005). Assessing the role of capital market Reforms in Nigeria: An increment Approach. Paper presented at the 46th annual conference of the Nigeria Economic Society in Lagos in August 2005.
  • Ayodele, A. I., & Falokun, G. (2003). The Nigerian Economy: Structure and Pattern of Development.  JODAD Publishers.
  • Central Bank of Nigeria (2003). Contemporary Economic Policy issues in Nigeria. Abuja, Nigeria: CBN Publication.
WeCreativez WhatsApp Support
Our customer support team is here to answer your questions. Ask us anything!