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The stock market is a common feature of a modern market economy and it is reputed to perform necessary functions, which promote the growth and development of an economy. This study examined whether the capital market reforms so far carried out in Nigeria have impacted significantly on the performance of the Nigerian Capital Market. To achieve this objective, ordinary least square regression (OLS) was employed using the data of capital market activities from 1988 to 2007. The result indicated that there is a significant difference in the performance of the capital market before and after the reform. This was achieved using the performance indicators which included the market capitalization, volume of stocks traded, value of stocks and the share index. The result showed that the indicators used increased faster in the post reform period than the pre reform period. The result of the study which established positive impact suggest that; government and stakeholders should strengthen the regulation and transparency in all the deals in the market as this will boast and attract more private participation in the market with its overall growth of both the market and the economy. And also, the NSE should find means of cutting down cost of raising fund on the exchange so as to allow more companies the opportunity of accessing fund from the exchange.


Title page – – – – – – – – i
Certification page – – – – – – – ii
Dedication – – – – – – – – iii
Abstract – – — – – – – – iv
Acknowledgement – – – – – – v
Table of contents – — – – – – – vi

Chapter One
1.0 Introduction – – – – – – – 1
1.1 Background of the study – – – – – 1

1.2 Statement of the problem – – – – – 6
1.3 Objectives of the study – – – – – – 7
1.4 Significance of the study – – – – – 8
1.5 Research questions – – – – – – 9

1.6 Research hypothesis – – – – – – 10

1.7 Scope of the study and Methodology – – – – 10
1.8 Disposition of the study – – – – – – 11

Chapter two
2.0 Literature Review – – – – – – – 12
2.1 The Structure and Organization of the Nigerian Capital
Market – – – – – – – – 12
– The Nigerian Stock Exchange
– The Capital Market
– Major Participants in the Nigerian Capital Market
2.2 Instruments traded on the Nigerian Stock Exchange – 19
2.3 Nigerian Stock Market Performance Indices – – 21
– Stock Market Size
– Liquidity
– Concentration
– Number of listed companies
– Strength in number
– Triplet of changes
– International Horizons
2.4 Regulation of the Nigerian Capital Market – – – 33
2.5 Impact of Economic Meltdown on Nigerian Stock Market – 47
– Sudden Slump
– On the Current Global Financial Crisis
2.6 Developments in Nigerian Stock Exchange – – – 56
– Central Securities Clearing System
– Automation of Trading System
– Technological Innovation in the Securities Market
– On-Line Trading
– Remote Trading
– The Electronic Bonus Share
– E-Dividend
– E-Allotment
– Emerging Challenges of Electronic Technology

Chapter Three
3.0 Introduction – – – – – – – 77
3.1 Research purpose – – – – – – – 77
3.2 Research Design- – – – – – – – 77
3.3 Data Collection – – – – – – – 78
3.4 Method of Data Presentation and Analysis – – – 79

Chapter Four
4.0 Data Presentation, Analysis and Interpretation – – 81
4.1 Data Analysis (Hypothesis Testing) – – – – 81

Chapter Five
5.0 Summary of Findings, Conclusion and Recommendations 94
5.1 Summary of Findings – – – – – – 94
5.2 Conclusions – – – – – – 95
5.3 Recommendations – – – – – – 97
Bibliography – – – – – – – – – 99
Appendices – – – – – – – – – 103



Mobilization of resources for national development has long been the
central focus of economic development. For sustainable growth and
development, funds must be effectively mobilized and optimally
allocated to enable business and the national economies to harness
their resources both human and material for optimal output
(Tokunbo, 2002).

The capital market is an economic institution which promotes
efficiency in resource allocation and capital formation. It enables both
corporate organizations and governments to raise long term funds for
financing new projects, as well as for project expansion and
modernization (Onosode, 1990).

According to Alabede (2004) the role played by the stock market in the
economic growth and development of a nation is recognized the world
over. Through that role long term funds are not only mobilized but
channeled for productive investments.

The stock market provides the fulcrum for capital market activities
and it is often cited as a barometer of business direction. According to
Obadan (1998), an active stock market may be relied upon to indicate
changes in general economic activities as mirrored by the stock
market index.

The indispensable nature of the capital market in any economy arises
from the two major functions it performs: – mobilizing and channeling
of long term investible funds from the surplus sector to the deficit
sector of the economy, Usman, (1998).

As a result of this role, governments place due emphasis on the
regulation and control of the capital market in general and the stock
market in particular. In recent times, there has been growing concern
over the role of the stock market in economic growth; hence the
market has been the focus of economists and policy makers.

According to Anyanwu (1993), the financial market is a complex
mechanism made up of procedures, instruments and institutions
through which deficit economic units and the surplus economic unit
are brought together to transact business with one another. In his
own contribution; Ibenta (2000), defined the financial market as a
network of institutional arrangements through which financial
resources accumulated by savers of funds are transferred to ultimate
users who may be individuals or households, corporate bodies or
governments for investment in economic activities, which include both
the production and distribution of goods and services.

Ever since government policy began shifting in the direction of limiting
the role of the public sector in business activity, the need for reform of
the capital market became a critical requirement for creating a viable
private sector. The need for promoting balanced financial
intermediation in a system significantly short of long term funds has
been a strong signal that the domestic capital market in Nigeria was
overripe for a major change (Uzor, 2007).

The financial market has two major segments namely the money and
capital markets. Ekoko (2007) describes the financial market as a
“market where institutions exchange financial assets and liabilities
through a process described as intermediation”.

The securities market comprises of two segments – the primary
market and the secondary market. The primary market deals with new
issues such as initial public offers (IPO), right issues, private
placement and offers for sale. The secondary market on the other
hand enables trading in existing securities i.e. securities previously
issued in the primary market.

Prior to 1998, activities in these two markets were manually executed.
Manual allotment of shares was carried out by issuing houses in the
primary market subject to clearance by SEC while in the secondary
market; trades were characterized by auction/open outcry by
stockbrokers on the floor of the Nigerian Stock Exchange.

From 1998, the Federal Government embarked on reforms in various
sectors of the Nigerian economy including the Nigerian capital market.
The commencement of Automated Stock Market trading in 1999
marked a watershed in the development of the Nigerian capital
market. In that year, the Nigerian Stock Exchange established a
subsidiary company called the Central Security Clearing System
(CSCS) to handle the clearing and settlement of transactions in the
stock market. And subsequently in the same year the exchange
commenced electronic transaction in securities.

The Automated Trading System (ATS) alongside the CSCS trading
engine has now reduced transaction period to T+3 (i.e. transaction day
plus three days) from an average period of three months before the
introduction of these measures. This implies debiting a buyer’s
account within three days after the transaction, while the seller is
enabled to collect his/her cheque within the same period (T+3).

The primary market has also come of age with the introduction of
electronic transaction processes in an effort to improve service delivery
to investors. Already, e-Dividend and e-Bonus payment systems are
being implemented in the market.

In an effort to address the problems associated with manual allotment
such as delays in issuance of certificates, e-Allotment is now being
introduced by the Security and Exchange Commission.

As earlier stated these reforms were aimed at redressing delays
associated with concluding security market transactions and aligning
the market with contemporary global best practices where very
significant information technology transformations in security
transactions have already taken place. The effects/impacts of these
reforms individually and collectively need to be investigated, hence the
need for this research.


The performance of the Nigerian Capital Market is currently (Sept.
2009) at a low ebb, due to the global economic meltdown. Despite
committed efforts to power the Nigerian economy through various
reforms – Nigerian Capital Market- to achieve accelerated grass roots
economic development, the Market seems to be faced with various
constraints which hinder its performance, rate of national economic
growth and development.

The Nigerian Stock Exchange would have done better but for
problems of high cost of raising funds, low awareness about the
significance of investing in the stock market by Nigerians, stringent
conditions for listing companies, fraud among stockbrokers, long
period of clearing/ verification of certificates, over trading, insecurity
of invested fund, etc.

To address these problems, regulators of the Nigerian economy have
embarked on a series of reforms in a bid to solving the problems
encountered in the Nigerian Capital Market. The impact of these
reforms – electronic reforms- on the performance of the Nigerian
Capital Market will be X- rayed.


The broad objective of this study is to determine the impact of capital
market reforms on the performance of the Nigerian Stock Exchange.
This study specifically designed:
1. To compare the pre and post reform performance of the
stock market using the market capitalization.
2. To compare the pre and post reform performance of the
stock market using the trading volume.
3. To compare the pre and post reform performance of the
stock market using the value of stocks.
4. To compare the pre and post reform performance of the
stock market using the share market index
Based on the findings, to make policy recommendations on how to
improve the overall performance of the Nigerian Stock Exchange.


It it’s hoped that this study will be of immense importance in many
The Nigerian policy makers will benefit from the result of the study, as
it will form part of the decision making process. Hence it will aid the
government in developing new policies.
The operators will use the results of the study to identify their
shortcomings and what is expected of them from the public and
government. The study will serve as a parameter for operators as to
know the need for the potentials of reforms to be exploited, so that
more revenue can be generated for the socio-economic growth and
Finally, the study will serve as a yardstick/guide for further research
on the same topic and other related topics.


The research will be tailored to provide answers to the following
1. Of what effect is the reform on the market capitalization of the
Nigerian Capital Market?
2. Of what effect is the reform on the trading volume of stocks in
the Nigerian Capital Market?
3. Of what effect is the reform on the value of stocks in the
Nigerian Capital Market?
4. Of what effect is the reform on the stock market index of the
Nigerian Capital Market?


The following hypotheses are formulated in null form for this study;
1. There is no significant difference between the stock
exchange market capitalization before and after the
2. There is no significant difference in the trading volume of
stocks in the exchange before and after the reforms.
3. There is no significant difference in the value of stocks in
the stock exchange market before and after the reforms.
4. There is no significant difference in stock market index
before and after the reforms.


The research will be conducted using data generated from the
Nigerian Stock Exchange.
The available data on the study are secondary data from Stock
Exchange journals, CBN bulletins and the bullion. Some other
sources include newspapers, magazines and other journals both
locally and internationally.
Internet facilities will also be explored to extract relevant data required
for the research.

This thesis is divided into five chapters. In the first chapter the
background of the study is presented followed by a problem area
discussion, research objectives, significance, research questions,
the hypothesis, scope of the study and finally the disposition of
the thesis.
In chapter two, theories and previous studies related to the topic
will be reviewed. The methodology used in this thesis will be
presented in chapter three. Chapter four contains an analysis of
the data used in this study.
Finally, chapter five will present the conclusions of the study
and recommendations for implementations.


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