Impact Of Capital Market On Employment Generation In Nigeria

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Impact Of Capital Market On Employment Generation In Nigeria


This study focused on the impact of capital market on employment generation in Nigeria using Nigeria stock exchange commission as case study. The study is was specifically focused on evaluating the performance of the capital market in relation to employment generation in Nigeria and make recommendations as to how the operations of the market could be improve to boost economic growth and development of Nigeria. The study adopted the survey research design and randomly enrolled participants in the study. A total of 100 responses were validated from the enrolled participants where all respondent are staff of Nigeria stock exchange commission.

Table of Content

  • Title Page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of Content
  • List of Tables
  • Abstract

Chapter One:


  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 1.3 Objective of the Study
  • 1.4 Research Questions
  • 1.5 Research Hypothesis
  • 1.6 Significance of the Study
  • 1.7 Scope of the Study
  • 1.8 Limitation of the Study
  • 1.9 Definition of Terms
  • 1.10 Organisations of the Study

Chapter Two:

Review of Literature

  • 2.1 Conceptual Framework
  • 2.2 Theoretical Framework
  • 2.3 Empirical Review

Chapter Three:

Research Methodology

  • 3.1 Research Design
  • 3.2 Population of the Study
  • 3.3 Sample Size Determination
  • 3.4 Sample Size Selection Technique and Procedure
  • 3.5 Research Instrument and Administration
  • 3.6 Method of Data Collection
  • 3.7 Method of Data Analysis
  • 3.8 Validity of the Study
  • 3.9 Reliability of the Study
  • 3.10 Ethical Consideration

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Analysis of Data
  • 4.3 Answering Research Questions
  • 4.4 Test of Hypotheses

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References

Chapter One


1.1 Background of the Study

The current high rates of unemployment and underemployment in Nigeria have generated a lot concern from Nigerians especially amidst positive macroeconomic indicators. Oladeji (2014) reported based on the submission of Anyanwu (1996) that taken alone none of the monetary variables (money supply, lending rate, domestic credit) significantly reduces unemployment and conversely, taken alone, all the fiscal variables (except recurrent expenditure) are highly significant in reducing unemployment in Nigeria. Oladeji (2014), therefore advocates an appropriate mix between monetary and fiscal policy instruments in order to reduce unemployment. While this is acceptable on the part of the government and monetary authority, the private sector input especially through the capital market for medium and long term financing which was not considered in Anyawu (1996) is also very crucial in curtailing unemployment. The capital market dimension for curtailing unemployment and improving the citizens’ welfare through the capital market wealth effect becomes more apt especially in an economy that is moving towards being fully private sector-led.

Unemployment according to Everyman’s Dictionary of Economics is defined as “involuntary idleness of a person willing to work at the prevailing rate of pay but unable to find it (Jhingan, 2008). The unemployment rate has continued to take an upward surge in the last three decades in Nigeria. In fact Oladeji (2014) notes that the deregulation of the economy according to the Structural Adjustment Programme (SAP) philosophy was not employment-focused but only pre-occupied with attainment of non-inflationary growth. For instance, evidence from the CBN (2011) report indicates that the unemployment rate was 3.5% and 4.7 % in 1990 and 2000 respectively and surged to 11.9 per cent in 2005 and the rise has continued unabated since then closing at 25.7 per cent in 2012. This has had major implications on the economy as the unemployed labour force contributes nothing to the growth of the economy. Available evidences are pointers to consequences of unemployment in the country including unimpressive economic growth rate, social vices and poverty. The Nigerian economy has grown at unimpressive rates over the years relative to its potentials given its abundant natural and human resources. The CBN (2011) report indicates that the economy grew at the rate of 6.4%, 7.0% and 7.4% in 2007, 2009 and 2011 respectively.

The poverty line has remained unabated with 54.7% on the absolute poverty line and 62.8% of Nigerians leaving on less than US$1.0 per day (CBN, 2011). Social vices and armed-struggles have also continued to assume upward trend most of which are attributable to unemployment while the nation struggles to contend with the consequences.

The poor state of infrastructure especially the epileptic power supply, roads and other important facilities to facilitate employment in rural agriculture and industrial employment in the cities has not helped matters. Limited access to credit and its attendant cost have continued to militate against expansion of industries and agricultural productions with grave consequences on job creation. Despite many government efforts at job creation through various programmes and interventions like the establishment of National Directorate of Employment (NDE), Graduate Agricultural Schemes and collaborations with the private sector for Commercial Agriculture Credit Scheme (CACS), Small and Medium Enterprises/Manufacturing Refinancing and Restructuring Fund (SME/MRRF) and a host of others, unemployment is still on the rise. Usman & Adeyemi (2012) asserts that in Nigeria, employment problems transcend beyond mere mismatch between available jobs and the scale or scope of prospective job seeker to cut across all known frontiers and sectors (the skilled, the unskilled and semi-skilled).

One of the most critical problems militating against business expansion is access to finance for both large and small scale enterprises. It is argued by Fehn and Fuchs (2003) that while the often-blamed labor-market rigidity alone is important, it does not provide a satisfactory explanation for the differences across countries and over time. Financial constraints are potentially important obstacles against creating new firms and jobs and thus against coping well with structural changes and against moving successfully toward the new economy. The large firms that are quoted on the exchange have can access large amount of formal financing from banks and the capital market. The financial market especially the banks and capital markets has been identified as being more efficient in the mobilization of surplus funds from households, firms and government and channeling them to the deficit units for more productive uses within the economy. While the banks concentrate on short and medium term credits the capital market is more dependable for long term debt and equity financing. Anyawu (1999) asserts that lack of funds affects the ability of firms to embrace viable investment opportunities especially in modern machineries and human resources development. Banks however are reluctant at lending funds to manufactures due to its perceived high risk and mismatch between the short term funds from banks and long term funds needed by industries despite its potential high long-run returns.

The capital market is a highly specialized and organized financial market and indeed essential agent of economic growth because of its ability to facilitate and mobilize saving and investment. To a great extent, the positive relationship between capital accumulation real economic growths has long affirmed in economic theories (Anyanwu, 1993).
Success in capital accumulation and mobilization for development varies among nations, but it is largely dependent on domestic savings and inflows of foreign capital. Therefore, to arrest the menace of the current economic downturn, effort must be geared towards effective resources mobilization. It is in realization of this that consideration is given to measure for the development of capital market as an institution for the mobilization of finance from the surplus sectors to the deficit sectors.

The development of capital market in Nigeria, as in other developing countries has been induced by the government. Though prior to the establishment of stock market in Nigeria, there existed some less formal market arrangements for the operation of capital market. It was not prominent until the visit of Mr. J. B. Lobynesion in 1959, on the invitation of the Federal government, to advice on the role the Central Bank could play in the development of local money and capital market. As a follow-up to this, the government commissioned and a set up the Barback Committee to study and make recommendations on the ways and means of establishing a stock market in Nigeria as a formal capital market. Acting on the recommendation of the committee, the Lagos Stock Exchange (as it was called then) was set-up in March 1960, and in September 1961, it was incorporated under Section 2 cap 37, through the collaborative effort of Central Bank of Nigeria, the Business Community and Industrial Development Bank (Alile &Anao, 1990). With the establishment of the Central Bank of Nigeria in 1959 and the coming into existence of the Lagos Stock Exchange in 1961 and Subsequently, the Nigeria Stock Exchange by an Act in 1979, a sound foundation was laid for the operation of the Nigerian Capital Market for trading in securities of long term nature needed for the financing of the industrial sector and the economy at large. After the incorporation of the Lagos Stock Exchange, it was granted further protection under the law and its activities was placed under some sort of control by the government, hence the passing of the Lagos Stock Exchange Act. However, the Lagos Stock Exchange was only operational in Lagos. By the mid 70’s, the need for an efficient financial system for the whole nation was emphasized, and a review by the government of the operations of the Lagos Stock Exchange market was advocated. The review was carried out to take care of the low capital formation, the huge amount of currency in circulation which was held outside the banking system, the unsatisfactory demarcation between the operation of Commercial Banks and the emerging class of the Merchant Banks, and the extremely shallow depth of the capital.

In response to the problems mentioned above, the government accepted the principle of decentralization but opted for a National Stock Exchange, which will have branches in different parts of the country. On December 2nd 1977, the memorandum and article of association creating the Lagos Stock Exchange was transformed into the Nigerian Stock Exchange, with branches in Lagos, Kaduna, Port-Harcourt, Yola and now in Federal Capital Territory (FCT) Abuja and some other cities. The history of Nigeria Capital Market could be traced to 1946 when the British colonial administration floated a N600, 000 local loan stock bearing interest at 3¼% for the financing of developmental projects under the Ten-Years Plan Local Ordinance. The loan stock, which had a maturity of 10-15 years, was oversubscribed by more than N1 million, yet local participation of the issued was terribly poor. Certainly, potential fund abound in Nigeria, but the overriding consideration in this project is to examine the impact of the capital market in harnessing and mobilizing these resources (fund) to generate economic growth in the country and consequently economic development.

1.2 Statement of the Problem

There is abundant evidence that most Nigerian businesses lack long-term capital. The business sector has depended mainly on short-term financing such as overdrafts to finance even long-term capital. Based on the maturity matching concept, such financing is risky. All such firms need to raise an appropriate mix of short- and long-term capital (Demirguc-Kunt& Levine 1996). Most recent literatures on the Nigeria capital market have recognized the tremendous performance the market has recorded in recent times. However, the vital role of the capital market in economic growth and development has not been empirically investigated thereby creating a research gap in this area. This study is undertaken to examine the contribution of the capital market in the Nigerian economic growth and development. Aside the social and institutional factors inhibiting the process of economic development in Nigeria, the bottleneck created by the dearth of finance to the economy constitutes a major setback to its development. As a result, it is necessary to evaluate the Nigerian capital market.

1.3 Objectives of the Study

The broad objective of this study examined the activities and performance of Nigerian capital market. The specific objectives of the study are as follows:

  1. To evaluate the performance of the capital market in relation to employment generation in Nigeria.
  2. To make recommendations as to how the operations of the market could be improve to boost economic growth and development of Nigeria.

1.4 Research Questions

This research was guided by the following research questions:

  1. What is the performance of the capital market in relation to employment generation in Nigeria?
  2. How could the capital market through its crucial role stimulate economic growth in Nigeria?

1.5 Hypothesis of the Study

The hypothesis that would be tested in the course of this research is stated below as:

  • H0: That the capital market operations have no impact on Nigerian employment generation.
  • H1: That the capital market operations have an impact on Nigerian employment generation.

1.6 Significance of the Study

The study explored the impact or effectiveness of capital market instruments on Nigerian economic growth and employment creation. Though the scope of the study was limited to the capital market, it is hoped that the exploration of this market will provide a broad view of the operations of the capital market. It will contribute to existing literature on the subject matter by investigating empirically the role, which the capital market plays in the economic growth and development of the country. The main importance of this study is that it will provide policy recommendations to policy-makers on ways to improve operations and activities of the capital market.

1.7 Scope of the Study

The economy is a large component with lot of diverse and sometimes complex parts; this research work only looked at a particular part of the economy (the financial sector). This work did not cover all the facets that make up the financial sector, but focus only on the capital market and its activities as it impacts on the employment creation Nigerian. The empirical investigation of the impact of the capital market on the job creation in Nigeria was restricted to the period between 2000 and 2023 due to the non-availability of some important data.

1.8 Limitation of the Study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. However, the researcher were able to manage these just to ensure the success of this study.

1.9 Definition of Terms

Employment Generation:

This refers simply to creation of job opportunities either through entrepreneurial ventures or government empowerment schemes etc.

Small Scale Enterprise:

Onuoha (1994), citing Osaze (1996), sees small business as one which is owned, managed and controlled by one or two persons, is family influenced in decision makings, has a differentiated organizational structure has a relatively small share of the market and employs less than 50 people.

Entrepreneurship Development:

This is the coming into existence in society of the class of individuals, who are not limited to pace odds.

1.10 Organization of the Study

The study is divided into five (5) chapters and organized as follows:

  • Chapter one form the introduction part, this is where the main theme of the research is given. It comprises of the statement of the problem, objectives of the study, research questions and hypotheses, significance of the study, scope and delimitation of the study and organization of the study.
  • Chapter two is the literature review of the impact of capital market on the economic growth of Nigeria.
  • Chapter three forms the research methodology which includes sources of data, method of data analysis and model specification.
  • Chapter four is the data analysis
  • While chapter five includes the summary, conclusion and recommendations.

Chapter Five

Summary, Conclusions and Recommendations


This chapter summarizes the findings on the impact of capital market on employment generation in Nigeria using Nigeria stock exchange commission as case study. The chapter consists of summary of the study, conclusions, and recommendations.

5.1 Summary of the Study

In this study, our focus was on the impact of capital market on employment generation in Nigeria using Nigeria stock exchange commission as case study. The study is was specifically focused on evaluating the performance of the capital market in relation to employment generation in Nigeria and make recommendations as to how the operations of the market could be improve to boost economic growth and development of Nigeria.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 100 responses were validated from the enrolled participants where all respondent are staff of Nigeria stock exchange commission.

5.2 Conclusions

With respect to the analysis and the findings of this study, the following conclusions emerged;

The capital market has perhaps been expanding leading to job creation and employment generating investments. Also, economic growth in Nigeria is consistent with employment generation as economic growth has a negative and significant impact on unemployment. It is therefore important to properly channel capital market growth in a manner that is supportive of job creation through the expansion of the quoted firms and admission of new firms into the market. Young promising enterprises especially those in manufacturing, agriculture and other labour intensive firms should also be encouraged to seek quotation on the NSE to enhance their rapid growth and consequently job creation.

5.3 Recommendation

Based on the findings the researcher recommends that;

  1. First improvement in the declining market capitalization by encouraging more foreign investors to participate in the market, maintain state of the art technology like automated trading and settlement practice, electronic fund clearance and eliminate physical transfer of shares.
  2. There is also need to restore confidence to the market by regulatory authorities through ensuring transparency and fair trading transaction and dealing in the stock exchange. It must also address the reported case of abuse and sharp practices by some companies in the market.
  3. Since the total listing is significant at 5% level of significance but still far cry compare to other exchange like South African and Egypt. Therefore, there should be increase in the total member listed companies to ensure stable macroeconomic environment in order to encourage foreign multinational companies (MNCs) or their subsidiaries to be listed on the Nigerian stock exchange, relax the listing requirements to the first tier market and ensure tax rationalization in the capital market to encourage quotation and public interest in shareholdings.
  4. Lastly, to boost the value of transactions in the Nigerian capital market, there is need for availability of more investment instruments such as derivatives, convertibles, future, and swaps options in the market.
  5. Given the present political dispensation, all the tiers of government should be encouraged to fund their realistic developmental programme through the capital market. This will served as a leeway to freeing the resources that may be used in other sphere of the economy..

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