CHAPTER ONE
1.0                 INTRODUCTION Economic growth is perceived as a continuous increase in the economic activity of a nation, measured by its Gross Domestic Product (GDP). A growing economy is said to experience development when factors that cause economic growth are recognized. One of such economic factors is availability of funds for private investment. Though the money sector and specifically commercial banks are expected to provide required funds for private investors, they do so only for short tenures and investors need an illustration that will provide funds for longer periods, for which banks are not suited. The implication of this is that private investment, an important component of GDP, will be hampered and this, in turn, may reduce growth. Capital market, according to the literature, always complements the effort of the banking sector by mobilizing financial resources for long-term private investment. If economic growth partly and importantly rests on capital market activities, then, capital market development should precede economic growth. In fact it is argued that innovation will be reflected in the economy when financial capital is made accessible, that is, financial capital makes it easy to develop projects that require large financial outlays for long periods before the project ultimately yields profits. In 2003, Electronic Business was commissioned in Nigeria so as to give investors access to Central Security Clearing System (CSCS) database online for the purpose of monitoring movements in their stock accounts. These reforms and others were put forward so as to continuously ensure an environment conducive for the effective functioning of the capital market. From the foregoing, it is clear that the capital market and its operations are not new in Nigeria. Recently, the sector underwent series of reforms in other to strengthen its performance. Given the fact that the capital market is capable of mobilizing investment fund for the promotion of private enterprise, it must be the case that the inception of such market will help Nigerian economy to grow. However, the existence of capital market may not guarantee private investment and hence economic growth. In fact, it may be the case that capital market works through private investment to impact on growth. If this is the case, then the growth effect of capital market may be absorbed by investment. Therefore it is important to assess the extent to which capital market affects the growth performance of the economy. This research work focuses on the role of capital market on economic growth andis made up of five sections. Section one is essentially an introduction, providing a broad perspective of the paper as well as its motivation. The next section provides a survey of existing literature on the channels of capital market for influencing economic growth. In section three, issues regarding methodology and models for estimation are discussed. Section four presents data, results and discussion of their interpretations. The final section of the paper provides a summary of findings, conclusions as well as policy implications arising from the findings.