Influencing Factors on Capital Market Development: The Nigeria Experience

Abstract

This paper examines the factors affecting the development of the capital markets in Nigeria, the study also looked at the performance indicators which show a relatively poor performance of the Nigeria Stock Exchange despite different measure put in place by the government. The study covered a period of ten years ranging from 2007 to 2017. In the course of the study several literatures were reviewed and secondary source of data was relied upon. The secondary data were obtained from the fact book and periodic publications of the Nigerian Stock Exchange, as well as the Securities and Exchange Commission, Central Bank of Nigeria, while descriptive and regression approve was used in data analysis. The study establishes both the external (macroeconomic and social cultural factors) and market (legal, regulatory and institutional) factors which have constrained the development of the Stock Market. However, there are some variables which did not clearly show the above relationship, namely macroeconomic stability-inflation and private capital inflows. It can therefore be concluded that stock market development is determined by stock market liquidity, institutional quality, and income per capital, domestic savings and bank development. Using the regression analysis, the study established that 85% of stock market development is determined by: stock market liquidity, institutional quality, income per capital, macroeconomic stability-inflation, domestic savings and private capital flows and bank development. The study recommends NSE needs to be developed further to enhance domestic resource mobilization. Various policies and programs that affect stock market development such as regulation of institutional investor and privatization need to be addressed. The policy makers SEC should consider reducing impediments to stock market development by easing restriction on international capital flows. NSE should play an increasing educational role and they should also change the approach from heavy handed type to more productive.