The project work takes a look at an appraisal of the Role of Capital market on Nigeria Economy a study of Nigerian Stock Exchange. The study shows the growth of the Nigerian Stock Exchange over the years, and since its inception, has been very slow compared to other stock exchanges established at the same time along with it in other nations. project topics   final year project topics and research materials 

Research design is a blueprint or strategy that enables the research identifies relevant approach to adopt in gathering and analyzing data. It is a subsumed of research methodology. Hence, research design member of a group of scientific study of method of research, in the course of this study, the entire questionnaire was collected and analysed based on simple percentage. After all these, the hypothesis formulated were tested, the technique of data analysis used for this research work is chi-square method.

Government through development stock and estate revenue bonds to insure greater fund for economic development stock and state.

The capital market is the principal sources of long term financing in Nigeria. In the light of this, it must be efficient in all respect to contribute greatly to the economic development of the country. Therefore, we can say based on the level of development in Nigeria, that the capital market is but marginally efficient.


Tittle Page





Table of Contents



1.1 Background of Study

1.2 Statement of the problems

1.3 Objectives of the study

1.4 Research Question

1.5 Research Hypothesis

1.6 Significance of Study

1.7 Scope and Limitations of Study

1.8 Definition of Terms



2.1    Introduction

2.2     The position of capital in economy development in Nigeria.

2.3     Meaning of small and medium scale enterprise

2.3.1 Characteristics of small and medium scale enterprise

2.3.2 Roles of small and medium scale enterprise

2.4     The contribution of the operations of the Nigerian capital

          Market to the growth of small and medium scale enterprises

2.5 The structure of Nigerian capital market

2.6 How to raise fund in the capital market

2.7 Definition of second –tier security market (SSM)

2.8 Rationale for second –tier security market

2.8.1 Listing requirement of the main market

2.8.2 Listing requirement of second-tier market

2.9     Benefits of public quotation

2.10   Companies Quoted on Nigerian SSM

2.10 Problems and prospect of the Nigerian capital market

CHAPTER 3      


3.1     Introduction

3.2     Area of Study

3.3     Research instrument

3.4     Data Collection Technique

3.5     Data analysis Technique



4.1         Introduction

4.2         Presentation and Analysis

4.3         Test hypothesis

4.4         Summary



5.1     Introduction

5.2     Summary

5.3     Conclusion

5.4     Recommendation

5.3     Conclusion

5.4     Recommendations







The capital market is a highly specialized and organized financial market and indeed essential agent of economy development because of its ability to facilitate and mobilize saving and investment. The concept market is one of the compartment of financial system that promotes savings and investment in an economy by providing the means and gathering of savings and making them available to borrowers. The other compartments of financial system are the money market which is being controlled by Central Bank of Nigeria (CBN). 

The primary role of capital market is to raise long-term funds for governments, banks and corporations while providing a platform for the trading of securities. The fundraising is regulated by the performance of the stock and bond markets within the capital market. 

It is important for investors to understand market trends before fully investing in the capital market. To that end, there are various market indices available to investors that reflect the present performance of the market. 

The Stock Exchange is one of the key institutions of the capital market, a network of individuals institutions and instruments involve in the effective channeling of funds from the surplus to deficit economic units (Alile, 1999). 

Stock Exchange is a place where securities such as bonds, stocks and shares of different shades and types are traded openly, and where one can purchase or sell any of such securities relatively easily. 

As Alile (1986), aptly puts securities as paper evidence of ownership or entitlement to a claim upon the assets of the issuing organization, which may be a business firm, government or a quasi-government organization. It is suffice to note that some document or any paper evidence have no fixed value attached to them without been tested on the stock exchange market at rates or value which are subjective and determined by the buyers and sellers of such security. Anao (1970) described stock exchange as an economic institution, which sees to the effectiveallocation of available capital funds to the diverse uses in economy. 

In fact, to an ordinary investor, it's a place where quick money can be made or loss. It represents an ideal setting for the smart and daring speculator to make a fortune with relatively little effort, in terms of contributing anything of substance to national output and the unwary can lose a fortune through false judgment. 

The stock exchange plays a central and indispensable role for which it has been variously described as the "hallmark or heart: of the capital market. From its strict definition the stock exchange is a market for trading on outstanding issues (shares/ stocks) Alile(1999) observed that the opportunity which it offers for subsequent trading in existing securities, have made it observed that the opportunity which it offers for subsequent trading in existing securities, have made it a decisive factor the success or otherwise of many corporate Issues and by extension, the effectiveness of capital formation in the economy. 

Under a free enterprise system, while we operate in Nigeria, the Stock Exchange is an important part in the economic life of the nation. Through its functions, it enables governments and industries to raise long-term capital to finance developmental projects for expansion and modernization of industrial/ commercial concerns. An effective stock market mobilizes savings and allocates a greater proportion to those corn peruse with the highest prospective rates of returns after giving due allowance for risk 

(Alile, 1999). The allocate function is critical in determining the overall growth of the economy. It capital resources are not provided to those economic area especially industries where demand is growing and which are capable of increasing prod action and productivity, then the rate of expansion of the economy will inevitably suffer. 

According to Alile (1999), this awareness has propelled many economists to use stock market as conduct for channeling long- term funds to their productive sectors. In particular, with the difficulties faced by many finance institutions in developing countries, capital market route has becomecredible alternative source of supporting equity and long-term investment financing. 

The investment prices ispopularly known as consisting of the discovery and purchase of securities which are undervalued, and keep in holding until they cease to be good "Value" so the adage in the market is buy when they are low and sells when they are high "Buy-hold-sell" syndrome is therefore as essential characteristic of the conventional 'beat-the-market' philosophy. This same philosophy has affected the character of financial reporting, which his conventionally perceived as having one of the principal aims as the provision of information that might help the ordinarysecurity holder to formulate, any/or sell decisions. 

The capital market is however quite distinct in practice from theory. Simon Kean (1985) observed that the capital market in practice, its infrastructure, its reputation are all firmly founded on the belief that it is not a reliable prime-seller and that it frequently and sometime significantly, misinterpret the economic signals it receives. Ariyo (2000) noted that prices are more market driven because transactions are based on market information that available right in the computer. 

The dictionary meaning of effective is producing the result that is wanted or intended in an ordinary sense, it might suggest that market effectiveness relates to the organization and administrative effectiveness of the security market, but the term effectiveness however is used here in a much narrow sense, being concerned specifically with how successful prices that reflects the worth or value of the securities and also whether the market incorporates all new information in its security price is a rapid and Uribiased manner especially at the moment in history where there is revolution in the information, technology and making information to be at the finger tip of many. In today's world, information is power and when used rightly, it is efficient and effective. 

Beave (1981) said that the two aspects of a price adjustment to new information i.e. speeds and quality would be necessary, as some effective market researchers only referred to the speed aspect and thus is incorrect. Beaver further said if a doubling price of a share was regarded as an effective reaction it is new in formation Just because the movement was instantaneous and the information also warranted a substantial reduction in the price, this will clearly produce an old interpretation of effectiveness. However, both aspect of the price reaction is equally important. So the main effect of efficiency is that it precludes most investors from being able to operate the market. 


The question whether a market is precisely effective or not cannot be adequately answered by simply 'yes or no'; there are some issues to be addressed. The investors view doubtless range from total belief in the market's effectiveness to total disbelief, with various degrees skepticism in between. It is noteworthy to point out that there are two extreme camps on the use of stock market effectiveness. Firstly, the academic who believe the market to be ineffective and act accordingly, and secondly, the practitioners who by and large are prepared, to take security prices as the best estimate of a share's worth (Simon, 1985).

The casual personal experience is an unreliable guide and tends more often 'that not to support the illusion of ineffectiveness, Simon (1985) suggested that there is need to bridge the gap between these two camps. An attempt to do this, the practitioner's camp is needed to be provided with a clarification of the researcher's view.

In order to appreciate fully the concept of stock market effectiveness, the following will be addressed: 

(i) What precisely does effectiveness means? 

(ii) Is it enough to find a single ineffectiveness for the market to be vividly described as being ineffective? 

(iii) It is possible for the market to be effective for one investor and not for another. 

(iv) Does the alteration of the stock market depend on its being ineffective? 

(v) Is it possible for an effective market to remain so if all investor come to believe in EMH (Effective Market Hypothesis)? 

(vi) If the market is effective, how should this affect the behaviour of investors, investment advisers, corporate managers and accountants? 


The objectives of carrying out this research are as follows: 

(i) To highlight the importance of the capital market and its role in the economy of Nigeria. 

(ii) To examine the rate at which new stocks are issued on the capital market 

(iiI) To examine the operations of the Nigeria capital market 

(iv) To determine the factors that affect share pricing system on the Nigerian stock exchange market 

(v) To examine the contributions of capital market in the effective allocation of resources within the economy 

(vi)  To examine how information that is being made available to investors are interpreted. 


The research shall be guided by the following research questions;

(1) What impact does the effectiveness and growths of capital market has on the Nigerian economy? 

(2) What are the factors that affect share-pricing system on the Nigerian Stock Exchange Market? 

(3) How does that information available to investors a in turreted? 

(4) What isthe rate at which new stocks are issued on the Nigerian capital market? 

(5) How could the capital market through its crucial role stimulate economic growth in Nigeria? 

(6) What is the trend of trading activities on the capital market? 


Ho: Capital .market is not important to the development of small and mediate scale enterprises. 

Hi: Capital market is important to the development of small and medium scale enterprises. 


The heightened interest in small and medium scale enterprises is in part as a result of lack of vigor or lackadaisical attitude paid by financial institution and the capital market to their plight. Analysis of the problem related to this ineffectual attitude indicate that they could probably have been available to the government initiated policies that will engineer the growth and development of small and medium scale enterprises, policies that was .cut of suasion compulsion make the capital market to pay more attention to the growth and development of small and medium scale enterprises. 


This study deals mainly with the importance of capital market in order to support the trading on stocks in the development of small and medium scale: enterprises. This study also discusses the major players and institutions operating in the capital market and their effort in developing small and medium scale in Nigeria. 

As a result of continued efforts of the Nigeria stock exchange to provide its facilities to small and medium scale enterprises, some small and medium enterprises that have engage second-tier listing on the exchange. However, there exist some encumbrances of the study. 

These include the limitation of available information, as many small and medium scale enterprises seen are reluctant to disclose. 


For the simplicity of this study to a layman the following are the definition of terms used: 

SMES: Small and Medium Scale Enterprises 

A medium scale enterprises is an enterprise where total cost including working capital but excluding cost of land is about N 150 million with a labour size between thirty six (36) and one hundred (100) workers. 

A SMALL SCALE ENTERPRISE: is an enterprise whose total cost including working capital but excluding cost of land N 1 million and labour size of not more than 10 workers. 

NIGERIA STOCK EXCHANGE: This is the apex regulatory body for trading of securities in Nigeria. It was established in 1961. It is the market for the raising of funds for the growth and expansion of companies. 

SHARE: Each of the equal parts into which a company's capital is divided entitling its owner to a proportion of the profits and equity. 

VALUE: An estimate of worth. 

Worth: The best valuation of share in relation to available information. 

SHARE PRICE: the market's estimate of worth of share. 

DIRECT EVIDENCE: Evidence relating to market effectiveness which focuses on the market's speed and quality of response to specific information items. 

INSIDER: An investor who has access to privilege price, sensitive information and who exploits his position for investment purposes. 

SECURITY MARKET LINE: A line indicating the trade-off of risk and return for individual assets. 

SEMI-STRONG EFFECTIVENESS: The market is effective as the semi-strong level of security prices adjust rapidly and without bias to all public information. 

STRONG EFFECTIVENESS: The market is effective at the strong level of prices respond rapidly and without bias to all information including unpublished data. 

WEAK EFFECTIVENESS: The market is effective at the weak level if it responds rapidly and without bias to the information set contained in the history of past prices. 

INDIRECT EVIDENCE: Evidence relating to market effectiveness which focuses on the use of information by experts and their relative success in pursuing an active strategy. 

SYSTEMATIC RISK: Risk that cannot be diversified away. 

BUY-AND-HOLD POLICY: The policy of buying a representative selection of the market portfolio and transacting only to the extent necessary to maintain the balance of the portfolio. 

TECHNICAL ANALYSIS: The analysis of past security's price movement as a method of predicting future price movement. 

INTRINSIC WORTH: The best estimate of a security's value In relation to the total set of information available. 

MARKET PORTFOLIO: The portfolio of all marketable risky assets in the world in their value related pro. 




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