This study is concerned with evaluation of the role of the Nigeria stock Exchange in capital formation and economic development. The Nigeria stock exchange being responsible for the mobilization of funds has being having divergent views over its impact by different quarters some has been praising stock exchange for its role in fund mobilization for capital formation, which invariably leads to economic development, while some has being criticizing it on its ineffectiveness. Result of various scholars on the above topic assigned greater role to the Nigeria stock exchange as an avenue for capital formation especially in developing countries like Nigeria.However, this study is a product of it observations mode and the reflection gathered from these previous studies and it is aimed at revealing the extent to which the Nigerian stock exchange had been performing its funds mobilization role crucial to the development of the economy.




Fredric Benhan (1960) defined capital formation as the amount, which a community adds to its capital during a period. The more capital a community has, the greater will be the volume of its output, which invariable leads to economic development. For the purpose of these studies, capital formation will be viewed from the contribution made to it by the Nigerian stock exchange. Also for the purpose of the study, capital formation should take into account only the issues in the stock exchange. To many people the stock exchange is a gaming house where underserved fortunes are made overnight on paper. To the city and to most economist, on the other hand the market is of vital importance to government and industry alike, for it is there and there alone that new long – term capital can be railed voluntarily from the public on a large scale and in short space of time.

One object of this study is to examine critically the part of the stock exchange really plays in the capital market and in our economic life. When an individual subscribe to an entirely new share, he is buying not only the right to dividends or asset or any other benefits to which he is entitled as a member of the company. He is also buying the possibility of disposing of his interest on the stock exchange. He acquire with his shares the right to execute deed, transferring his securities for a consideration to some one who may be a stranger both to the company and to himself, and with whom he is put in content entirely through the market’s agency. This is the one of the essential attributes of a quoted as distinct from an unquoted stock, the stock exchange in its presents firm could not exist, and without it, the stock exchange would not grant quotation. Indeed, new issue can be made only because of the existence of a market in old ones new securities placed by a borrower are in competition with all existing stock and shares for the investors favour, and that competition is one of the factors determine price.

Sometime, it is the other way round and the tail ways the dog, for new issues of substantial sizes in having a big influence upon the prices of old securities, of the thousands of millions worth quoted on the stock exchange, only a relatively small fraction enters in to trade on any one day a large addition to the volume that would normally change hands inevitable has repercussions upon price. What matters is not that it is sometimes the old and the new securities which predominate, but that it is the interaction between the supply of both new old securities and the demand for market prices, the stock exchange provides the machinery for bringing buyers and sellers of securities both new and old, into contact with one another.

And its economic function is to establish price at the value of new or substituted capital and existing securities bought is equated to the value of available funds, including the proceeds of securities sold. Given the investors indifference as between the old and new thing and the market for new issues as another. In any event the volume of old securities traded in depends in part on price, which in turn is closely associated with the price and amounts of new issues. From the community’s point of view, the essential fact is that the price of new and old shares being interdependent, the terms on which borrowers can raise money are closely bunds up with the terms on which investors can buy competing goods in the form of old securities. Without the free exchange of stocks and shares savings would not readily towards the industries requiring them. The only alternative would be compulsion. While privately controlled business exist, they must have access to fresh money, and this cannot be had upon favorable conditions without markets catering for old investments as much for new.

Despite the large number of companies which nowadays would be classed as industrials, the relatively greater importance of foreign loans, banks and financial companies railways both here and abroad, public utilities, heavy industry, and mines and plantations. It is clear form the nature of these securities that the market was entered whenever the type of undertaking was such that money just had to be raised on a big scale, or when in the nature of things there was a pre – existing parent business to fall back on finance. The stock market is only a place of last resort. Borrowed do not turn to it unless money is needed in sums, which is beyond the power of individuals to provide, and unless a renewable form the social point of view, it is usually said that the canalization of savings into capital for industry and government is the purpose of the stock exchange.

The potential investors who have funds, and want to add to the holdings with out merely financial the purchase of one security with the sale of another, source their money from three sources, which run together into single stream. Secondly, there are floating savings, which through accruing out of the surplus current receipts of all the types of investors, they are not consistently invested in one form of asset or another. The same person or institution may vary from year to year the proposition of saving allocated between the stock exchange and other outlets. The allocation may be in accordance with some definite plan and may depend on opportunity, for with the limits of tolerance allowed by individual policy, the stock of activity within the stock exchange has some beaming upon the proportion of the community saving directed to it.

Finally, it is possible for funds to reach the stock exchange without coming out of current savings at all, assets of other kinds may be sold to by marketable securities, or an exceptional consumption may be reduced in other to make an extra purchases of securities. As the third source is unlikely to be large over a period, the flow of funds to the stock exchange depends mainly on the total supply of the community savings and on variation in the proportion of savings used for buying marketable securities. It is common place to say that new private investment in the stock market in drying up. This does not mean that individual do not a major ultimate source of the stock exchange’s new money. But more and more does their contribution tend to be indirect, through compulsory or contractual savings. New money coming in to the market is now provided to a great extent by pension fund, insurance companies and other types of institutions of investors. They dispose of part of the contribution of millions of private persons, and their policy towards marketable securities in renewal or towards particular investment that have the greatest significance for the stock exchange activity and price. Also the so-called extvabudgetary funds are potential important, for who ever they have a surplus; a part of it is available for investment on the stock exchange.


I To examine the role of the Nigeria stock change in capital formation and economic development of Nigeria.

II To appraises to what extent the Nigeria stock exchange have responded to the economic development.

III To evaluate to what extent that Nigeria stock exchange has encourage Nigerian private sector as a medium of raising funds for the stock of change institution.

IV To Assess whether Nigerian stock exchange can move effectively reaches participants by the private sectors in the post structural adjustments programmed (SAP) era.


The purpose of this study is to examine the role of the Nigerian stock exchange in capital formation and economic development of Nigeria.


This study will be very significant to all participants in the capital market viz; regulatory authorities, investors, analysts, theories risk, stock brokers, and issuing houses, Presently the existing theories leaves room for additionally and changing role of the Nigeria stock exchange evidence abound in Nigerian that capital is scarce and cost of borrowing is high, therefore there is every heed to look inward and fund a way to increase our aggregate investment in equity or loan stock. I believe that the Nigerian stock exchange has the greatest potentials to improve the capital formation ability of this country. I hope that this study today will file an empirical viewed in a manner suiting the purpose of other worker’s in economic and related studies, and especially that they contribute activity to the systematic organization of knowledge about capital formation and economic development.


From the purpose of this study, two testable hypothesis have developed with Ho representing the Null hypothesis and Hx representing the alternative hypothesis, which is accepted when Ho is rejected. This will help in proving the objective and solving the problem of this study. The Null hypothesis was formulated to negate certain factual statement and attempts have been made to prove them wrong where Ho actually proves wrong, the alternative hypothesis Hi was accepted.

  1. Ho: there is no significance difference between the accounting system adopted in the Nigerian stock exchange and other organization.

Hi: there is difference between the accounting system adopted in Nigerian stock exchange and other organization.

  1. Ho: the procedure of accounting treatment of transaction in Nigerian stock exchange is not the same with other organization.

Hi: the procedure of accounting treatment of transact in Nigerian stock exchange is the same with other organization.

  1. Ho: Nigerian stock exchange do not maintained central store in their industry.

Hi: Nigerian stock exchange maintained central store in their industry.


The results presented in this study are subject to a variety of limitations. First, the study concentrates almost exclusively on capital formation, though have been largely ham pared in a way and equally have success in some quarters. Secondly, the computations of some of the secondary data used in the analysis of the study were just started by the various sources of data collection thereby reducing the Spam or scope of the analysis.