CHAPTER ONE

INTRODUCTION
• BACKGROUND OF THE STUDY
The Nigerian stock exchange, now known as Nigerian Exchange Group, is a Nigerian stock
exchange that was founded in 1961 in Lagos State. In March 2021, the Nigerian stock exchange
was demutualized from a member-owned not profit entity into a shareholder-owned, profit-
making entity Nigerian Exchange Group plc. The stock exchange, is also known as securities is a
market place where financial instruments such as stocks, bonds, and other securities are bought
and sold. The Nigerian Stock Exchange (NSE) was established in 1960 to facilitate the buying
and selling of securities in Nigeria. Since then, the exchange has played a crucial role in
mobilizing capital for industrial development. It provides a platform for companies to raise
capital by issuing stocks and bonds for investors to buy and sell these securities. Stock exchanges
plays a role in facilitating capital formation, liquidity, and price in the financial market (Long et
al., 2020).
The country's industrial sector has faced significant challenges, including inadequate
infrastructure, inefficient regulatory frameworks, and limited access to long-term capital. Despite
these challenges, the NSE has undergone significant reforms aimed at improving its efficiency
and effectiveness. The exchange has introduced new products, such as derivatives and exchange-
traded funds (ETFs) and has implemented measures to improve corporate governance and
transparency. The Nigerian government has also implemented policies aimed at promoting
industrial development, including the National Industrial Revolution Plan (NIRP) and the
Economic Recovery and Growth Plan (ERGP). These policies have highlighted the importance
of the stock exchange in mobilizing capital for industrial development. However, the relationship
between the stock exchange and industrial development in Nigeria remains understudied.
Existing literature has focused on the role of the stock exchange in economic development, but
has neglected its specific impact on industrial development.
This study aims to fill this knowledge gap by investigating the role of the stock exchange in
industrial development in Nigeria. The study will examine the relationship between stock market
development and industrial growth, the impact of the NSE on capital mobilization for industrial
development and the effectiveness of the NSE in promoting corporate governance and
transparency in industrial companies.
The study will also evaluate the role of liquidity in the stock market on industrial investment and
growth, and assess the contribution of the NSE to the growth of small and medium-sized
enterprises (SMEs) in the industrial sector. The findings of this study will provide valuable
insights for policymakers, regulators, industrialists, and investors on how to leverage the stock
exchange to promote industrial development in Nigeria.
 Industrialization is the process through which agrarian [farm-based] economies transforms into
ones based on mass manufacturing, it is characterized by improvement in technology and
infrastructure, urbanization, economic growth and higher living standards (Eriksson et al., 2014).
In Nigeria stock exchange plays an important role in contributing to economic development by
enhancing the liquidity of capital investments through secondary market mechanism.
Stock exchange market has also contributed to industrialization through its ability to provide
financial resources, through equity and debt securities, to private sector enterprises [both large
and small] and by this process has contributed to the development of the industrial sector.
Stock exchange also plays the following crucial role in industrialization
• Proving liquidity; Stock exchanges provides liquidity to investors, allowing them easy
access to buying and selling of securities, which helps to facilitate industrial development
• Facilitating privatization; Stock exchanges provides a platform for government to
privatize state- owned enterprises, which helps to promote industrialization and economic
growth.
• Encouraging foreign investment; Stock exchange provides platforms for foreign investors
to invest in domestic companies, which helps to promote industrialization.
1.2 STATEMENT OF PROBLEM.
The role of stock exchange market in the industrial sector and economic development should not
be brushed aside. Industrial development in Nigeria is still low compared to other economies, as
such there's low production as well as reduction in expansion and modernization of industrial
sector. Against the background of this research, these are the statement of the problems;
The Stock exchange market is expected to play a significant role in industrial development by
providing a platform for industries to raise capitals, improving liquidity, and enhancing
cooperate governance and transparency. However, the NSE has faced challenges in fulfilling
these role, including low liquidity, limited depth, and a lack of regulatory effectiveness. These
challenges has hindered the ability of industries to access capital, leading to a significant gap in
industrial financing.
The lack of depth and liquidity in the Nigerian stock market has also limited the ability of
industries to raise capital, making it difficult for them to compete with their counterpart in other
countries. Furthermore, the dominance of a few large companies in the market has limited
opportunities for smaller industrial firms to access capital, highlighting the need for a more
inclusive and diverse market.
The slow pace of industrial development in Nigeria has significant implications of the country’s
economic growth and development, including high levels of unemployment, poverty, and
inequality. Therefore, it is essential to investigate the role of the stock exchange in industrial
development in Nigeria, with a view to identifying the challenges and opportunities facing the
market and providing recommendation for improving its effectiveness in promoting industrial
growth and development.
Hence the need for this research on how these various problems can be resolved.

• OBJECTIVE OF THE STUDY

The objectives of this study are;
1. To examine the relationship between stock market development and industrial growth
in Nigeria.
2. To investigate the impact of the stock exchange on capital mobilization for industrial
development.
3. To analyze the role of the stock exchange in promoting corporate governance and
transparency in industrial companies.
4. To determine the effect of stock exchange liquidity on industrial investment and
growth.
5. To assess the contribution of the stock exchange to the development of small and
medium-sized enterprises (SMEs) in the industrial sector.
6. To identify the challenges facing the stock exchange in promoting industrial
development and provide recommendations for addressing them.
7. To evaluate the effectiveness of the stock exchange in facilitating access to long-term
capital for industrial projects.
8. To examine the relationship between stock prices and industrial production in Nigeria.
9. To investigate the impact of stock exchange reforms on industrial development.
10. To provide policy recommendations for enhancing the role of the stock exchange in
promoting industrialization in Nigeria.

1.4 RESEARCH QUESTIONS.

1 What is the relationship between stock market development and industrial growth in
Nigeria.
2 How has the Nigerian stock exchange (NSE) contributed to capital mobilization for
industrial development.
 3 What is the impact of Nigerian stock exchange on corporate governance and
transparency in industrial companies
4 How does liquidity in stock market affect industrial investment and growth in Nigeria
5 What challenges does the NSE face in promoting industrial development, and how can
they be addressed
6 What is the relationship between stock prices and industrial development in Nigeria
7 What policy recommendations can be made to enhance the role of the NSE in
promoting industrial development in Nigeria.

1.5 RESEARCH HYPOTHESIS

HO; The Nigeria exchange group has no significant effect on industrial development in
Nigeria.
HI; The Nigerian exchange group has a significant effect on industrial development in
Nigeria.

1.6 SIGNIFICANCE OF THE STUDY.

By exploring the role of stock exchange in industrial development, this research aims
to contribute to the promotion of industrial growth, economic development, and poverty
reduction in Nigeria, by contributing to the understanding of the relationship between
stock market development and industrial growth in Nigeria by providing insight for
policy makers and regulators on how to enhance the role of stock exchange in promoting
industrial growth, offering guidance for industrialists and investors to leverage and take
full access of the stock exchange to access capital and promote industrial development by
highlighting the importance of liquidity in the stock market for industrial investment,
growth and demonstrate the potential of the stock exchange as a platform for promoting
SME growth and industrial development.
Secondly, it highlights the crucial role that stock exchange plays in facilitating
industrial growth and development by providing a platform for companies to raise capital
and investors to participate in the growth of business.
Thirdly, it sheds light on challenges facing stock exchange in emerging markets like
Nigeria, where industrial development is critical for economic growth and poverty
reduction. The study’s findings will provide valuable insights for policy makers and
regulators seeking to improve the efficiency and effectiveness of the stock exchange in
promoting industrial development.
 Lastly, the research will contribute to the existing body of knowledge on the
relationship between stock markets and industrial development, providing a framework
for future research, by providing practical guidance for industrialist, investors and other
stakeholders seeking to leverage the stock exchange to promote industrial development in
Nigeria.

1.7 SCOPE OF THE STUDY.

The research focuses on the Nigerian context, with a specific emphasis on the
Nigerian stock exchange in industrial development in Nigeria is focused on examining
the relationship between the Nigerian stock exchange and the growth of the industrial
sector in Nigeria and its impact on industrial development in the country.
The scope uses quantitative and qualitative methodology research methods,
including data analysis, surveys and interviews with a cover period of 10 years, from
2012 to 2022 the study will use mixed method approach, and will include a survey of
industrial companies listed on the NSE, interviews with industry experts in other to get
information of both the Nigerian stock exchange and industrial sector in Nigeria, with a
focus on industrial sectors like manufacturing, construction, and other related industries.
One of the benefits of this research is to investigate the relationship between
stock market development and industrial growth by examining the impact of Nigerian
stock exchange on capital mobilization and Nigerian stock exchange as a platform for
long-term investment in the industrial sector by providing policy recommendations for
improving the role of the NSE in promoting industrial development in Nigeria and
analyzing the impact of stock exchange reforms on industrial development by comparing
the performance of NSE with other stock exchanges in Africa and globally.
This research will also help Nigerian stock exchange in improving on their areas
of inefficiencies on industrial development in the Nigerian economy by investigating the
impact of the NSE on capital mobilization for industrial development to examine
effectiveness of NSE in promoting corporate governance and transparency in industrial
companies.
It will also help us identify the challenges facing the NSE in promoting industrial
development and provide recommendations for addressing them, and assess the
contributions of the NSE to the growth of small and medium-sized enterprises (SMEs) in
the industrial sector.
Lastly, this research will evaluate the role of liquidity in the stock market on
industrial investment and growth by focusing on the Nigerian industrial sector including
manufacturing, construction, and other related industries.
 CHAPTER TWO
INTRODUCTION
This chapter of the research work consist of the following subheads;
 Conceptual framework
Theoretical framework
Empirical studies