The first Nigerian stock exchange was opened in Lagos in 1960. Seven investors signed a Memorandum of Association establishing it. These investors included Sir Odumegwu Ojukwu, C.T. Bowring and Co. Nigeria Ltd., Chief Theophilus Adebayo Doherty, and Investment Company of Nig. Ltd. In the following years, the Nigerian stock exchange has grown in strength and importance.
The First-tier Stock Exchange was established in 1961. It is the premier venue for trading financial instruments in the Nigerian economy. It has helped to mobilize funds in the country from deficit to surplus units of the economy. It has also facilitated increased investment in the country. Nigeria’s capital market is made up of primary and secondary markets. The primary market deals with new issues of shares, while the secondary market trades in quoted shares.
The Securities and Exchange Commission (SEC) is the apex regulator of the Nigerian stock exchange. It answers to the Federal Ministry of Finance. Its mandate is to promote the development of the capital market in Nigeria, protect investors, and open the doors for private sector-led growth. It is important to note that Nigerian stock exchange is an affiliate member of the FIBV and IOSCO, and is the foundation member of ASEA.
The CBN has collaborated with other government agencies to ensure the safety of the financial system. It works with the Securities and Exchange Commission (SEC) to create market regulations on digital financial services and to monitor mobile money operations. In addition, it collaborates with the Nigerian Communications Commission (NCC) to regulate mobile money operations. The CBN has identified informal payment systems as key drivers of financial inclusion. However, it needs to continue collaborating with relevant stakeholders to ensure that the financial system remains secure and safe for consumers.
In addition to enforcing the SEC’s rules, regulators should take action against the manipulators in the Nigerian stock market. The impact of manipulation on the growth rate is reflected in the negative effect of value traded on GDP. For every 1% increase in the All-Share Index, the economy declines by 8%. Therefore, the government should implement laws to prevent manipulation in Nigeria’s stock market.
In Nigeria, the market is very young and is one of the fastest-growing emerging financial markets. However, investigations have revealed unethical practices that contributed to the 2008 collapse of the Nigerian stock market. This negatively affected the economy and caused huge divestments from the market. Furthermore, the Nigerian Stock Exchange did not have an integrity score that could justify the scandals it caused. The collapse of the stock market led to loss of jobs and tax revenues and adversely affected the Nigerian economy.
The central bank of Nigeria has launched the eNaira as a central bank digital currency on October 25, 2021. After the Bahamas, China has also conducted CBDC pilots with their citizens. In Nigeria, the size of the economy makes such developments highly anticipated by central banks and outsiders. This research focuses on the efficiency of the Nigerian stock market and its relation to economic growth. The study is divided into five sections: Part II outlines literature review, Section 3 focuses on data and methods, Part IV includes policy implications.