AN ECONOMETRIC ANALYSIS OF THE IMPACT OF THE NIGERIAN CAPITAL MARKET ACTIVITIES ON ECONOMIC GROWTH IN NIGERIA
1981 - 2008
CHAPTER ONE
1.1    INTRODUCTION
    The major engine of growth and development of any economy is the capital market, which accommodate certain institutions for the creation, distribution and exchange of financial assets and management of long-term liabilities. An economy without a capital market cannot grow since the capital market is responsible for long term growth, capital formation and allocation to development use efficiently (Osazee, 2000).
    A developing country like Nigeria has a strong affinity for further growth and development. Like every other country, Nigeria has a financial framework responsible for regulating the financial aspects of its economy. The major aim of the financial system is to mobilize and channel funds effectively from the surplus to the deficit sectors and to transfer resources from savers to investors. It performs the important functions of providing the needed finance for the provision of essential goods and services to bring about economic growth through the interplay of individuals, the money market and capital market. While the money market provides finance on a short-term basis, the capital market provides finance to corporate bodies, government and individuals on medium to long term basis. The capital market is for the issuance and trading in long term securities and claims such as bonds, debentures and equity stock.
    The emergence of capital market is owed to the development of a market oriented economy which is required as an alternative source of funds to the money market for the4 purpose of funding economic projects.
    The capital market can be defined as a complex of institutions and mechanisms, process and infrastructure that in various ways facilitate and bring together suppliers and users of medium to long term capital for investment in socio-economic development projects. According to Mallam Musa Al-Faki, the capital market embraces all the arrangements that facilitate the buying and selling of securities.
The Nigerian capital market has been and is still a major source of finance to both government and firms. It has several functions which include: providing a market mechanism for management charges as compared with the administrative or political mechanism of public sector corporations, the provision of market measure of returns on capital for the improvement of the efficiency of capital. It also promotes and provide he means to improve corporate governance and the mobilization of functions that has helped to a considerable extent in solving our economic problems.
With the exception of the functions mentioned above, it also facilitates the transmission and implementation of macro economic policies. This goes to show why the public authorities that are responsible for economic policies and private sector agents who are active in the capital market have vested interest in capital markets that are both efficient and stable. Economist and researchers unanimously believe that capital market wherever they operate have in no small measure played an integral role in the economic growth of their host economies.  
The major focus of this research is to empirically assess with the use of facts and figure the Nigerian capital market and its impact in economic growth in Nigeria. This research will also critically evaluate the major achievements and contributions of the Nigerian capital market.
1.2    STATEMENT OF THE PROBLEM
    The linkage between stock market and economic growth proxied by Gross Domestic Product (GDP) has been a topic for discussion over the years.
    The market capitalization of listed companies which is usually a percentage4 of GDP according to the World Bank report has been experiencing a decline through the years. Market capitalization (also known as market value) is the share price times the number of shares outstanding. Listed companies are the domestically incorporated companies listed on the country’s exchange listed companies do not include investment companies, mutual funds, or other collective investment vehicles.
    Moreover there is no confidence in the market and the presence of sharp practices by some companies in the market. Also more than 50% of Nigerian are not conversant with the activities in the capital and poor infrastructure as the main obstacle for future sustainable growth.
1.3    RESEARCH QUESTIONS
    With regard to the above problems and in order  to address the short comings and proffer solutions, the following questions could be asked.
How does the capital market increases the Gross Domestic Product (GDP)?
What extent has the capital market contributed significantly to the overall growth of the Nigerian economy?
1.4    OBJECTIVES OF THE STUDY
    The task of this work is to:
Examine the impact of the Nigerian capital market on its economic growth.
And the channels through which the capital market promotes economic growth.
1.5    HYPOTHESES OF THE STUDY
Ho:    Capital market does not contribute to the growth of Nigerian economy.
Hi:    Capital market has contributes to the growth of Nigerian economy.
1.6    SIGNIFICANCE OF THE STUDY
    The significance of this study cannot be over emphasized especially since it deals with such a sensitive organ as the capital market. However Osimubi and Amaghionyeodiwe (2003) had also examined the relationship between the Nigerian capital market and economic growth during the period 1980-2000. The result indicates that there is a positive relationship between the stock market and economic growth and suggested the rapid development of the stock market.
    This study is so important as it will endeavour to examine the relationship between the capital market and economic growth from the period of 1981 to 2008. In the course of doing this it will examine how the capital market currently aids Gross domestic product (GDP) and long rune economic growth. It will also provide suggestion on how foreign private investment will benefit the capital market. This study will also provide opportunities for government to finance projects aimed at providing essential amenities for socio-economic growth and development.
1.7    SCOPE/LIMITATION OF THE STUDY
This study will cover how the capital market has impacted on th4e economy within 1981 to 2008. It will also examine how the capital market makes GDP.
And just as no research work can lay claim to a repertoire of knowledge of any discourse or provide an exhaustive handling of any issues, this work under study is as well limited. This is as a result of some constraints which are inevitable in an organized effort towards providing solutions to perceived problems.
Its primary limitations are lack of sufficient funds for the study, rudeness of some custodians of data and scanty statistics with unavailability of some relevant  data due to lack of record keeping. Also the high cost of transportation to source for information also made it difficult to access most of the publication of research institutions and inadequate research materials online and even in academic publications and journals was also a problem.
Nonetheless, it made to do with the materials in reach which no doubt proved capable in tackling the topic at hand.