FUELING PROSPERITY: THE TRANSFORMATIVE POWER OF THE CAPITAL MARKET IN NIGERIA

Abstract

The capital market stands as a cornerstone of economic progress, facilitating the formation of long-term growth capital essential for sustainable development. In tandem, the money market complements this role by providing the requisite working capital to bolster gross fixed capital formation. Despite this symbiotic relationship, the Nigerian capital market has faced challenges in fulfilling its fundamental function of catalyzing investment. A critical metric for assessing capital market development lies in the ratio of long-term fixed capital raised relative to the gross domestic product (GDP). Between 1999 and 2004, this ratio averaged a mere 1.36%, while new issues to gross fixed capital formation hovered around 16.0%. Concurrently, market capitalization to GDP stood at a modest 14.25% during this period. These statistics underscore the subdued performance of the Nigerian capital market, coinciding with an average annual economic growth rate of 3.2%.

Notably, the bulk of funds raised within Nigeria emanates from the money market, predominantly short-term in nature and lacking the transformative potential of growth capital. As elucidated by Mary et al. (2012), this trend poses significant implications for sustainable economic expansion and development. This paper seeks to delve deeper into the challenges hindering the efficacy of the Nigerian capital market, shedding light on the structural impediments constraining the mobilization of long-term growth capital. By critically analyzing the prevailing dynamics and empirical data, the study aims to offer insights into potential strategies for revitalizing the Nigerian capital market and harnessing its full potential as a catalyst for economic growth and development.