Constraints to Capital Market Growth in African Economies: The Case of Nigeria

Capital market as an intermediating sector for economy should organically grow as the economy grows overtime. Using Nigeria as case study, the paper investigates the constraints to the growth of the market. It adopts a primary sourcing of data from regulators, operators and investors and identifies ten variables for investigation. Using regression technique it discovers that four variables were immediately significant at various levels. To achieve a better fit for the variables a remodelling resulted in six of the variable becoming highly significant. Variables of concern were basically poor organisation of the market, high transaction cost, lack of various securities, and instability in governmental policies. A surprising outcome shows that the rates of interest, inflation and exchange have had a positive effect on the market. Major recommendations of the study are on strengthening of the internal structures of stock exchange, introduction of over counter (OTC)) deals and improving of corporate governance environment. In addition, external constraints to the system can be solved by the government.