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As a matter of fact, public service has long been known for its ability to generate wealth. As a result, public enterprises have typically been viewed as drain pipes for the government’s budget. As a result, budgetary strains and an avoidable burden on the economy are created. It has thus become a national policy imperative to disengage the public sector from areas where the private sector has a comparative advantage to perform, while allowing the state to be concerned. Security and a conducive environment for business growth through increased wealth creation

It is important to note that for many developing countries, such as Nigeria, it was perhaps unavoidable for the government to promote initial private sector investments in the early stages of national development.

Unfortunately, the government became so involved in matters that should have been handled by the private sector that it could no longer perform its traditional functions.

Meanwhile, the government’s participation in national development and wealth creation resulted in the creation and establishment of approximately 600 federally owned public enterprises (Anya 2001) (over the year to date), which are now widely regarded as inefficient, corrupt, unproductive, and wasteful.

These factors, combined with the impediment to government efficiency in performing its traditional functions, sparked several movements in national consciousness regarding the necessity of privatization and commercialization.

Privatization, defined as the sale of public assets or enterprises to the private sector, is viewed as a tool for increasing productive and allocative efficiency and economic growth. It also has the goal of reducing the public deficit and improving public finance, encouraging competition and broad private sector participation in economic development, developing local capital markets, and so on. Its ultimate goal is to liberalize economies by increasing private sector participation and capacity utilization.

In March 1988, Ibrahim Babangida, the then-head of state, issued a decree establishing the Technical Committee on Privatization and Commercialization (TCPC). The Committee, which was previously established in July 1988, was tasked with reforming public enterprises slated for privatization; this move was an integral and critical component of the Structural Adjustment Programme (SAP), which began in 1986.

The Committee, which was later replaced by the Bureau for Public Enterprises, has been working on this task since then, albeit in a different phase. The popular trend, particularly among developing countries, has been to divest through the capital market in order to ensure transparency, credibility, and widespread ownership of the shares of privatized enterprises.

Privatization and commercialization have created opportunities for individuals and organizations to buy and sell securities both within and outside of Nigeria. This significant development has posed challenges as well as opportunities for the growth of Nigeria’s securities market and increased public participation in the market.

It was stated at the end of the first phase of the exercise that “it had created a large body of shareholders and deepened and broadened the Nigerian Capital Market to position of being the most developed in black Africa” (Anya 2001). It has boosted investment and raised capital market awareness both locally and globally.

This study conducts a critical review and examination of the impact of privatization on the capital market, taking into account the level of innovation and awareness engendered in the capital market by privatization policy in relation to the Nigerian Stock Exchange.



The Nigerian Capital Market’s mission statement emphasizes the market’s role and involvement in facilitating and stimulating socioeconomic growth and development through the mobilization and formation of long-term funds for investment.

However, it has been observed that the market has not played this role efficiently or effectively. In fact, prior to and during the first phase of the exercise, the market was less popularized locally and internationally. Until recently, it was not a popular source of funds due to economic insecurity and the government’s overbearing presence in economic matters.

This research study will take into account this understanding and perspective on the contribution of privatization.

i. To what extent has the populace become more involved in the ownership of the economy’s corporate sector?

ii. What impact has privatization had on the market?

iii. What factors are working against privatization and the Nigerian capital market?

iv. How have the companies that have been privatized fared after receiving privatization approval from the capital market’s governing bodies?

v. What challenges has the exercise posed to the capital market’s regulatory framework?

vi. What benefits have Nigerians reaped from the government’s privatization program?

Given the importance of the capital market in the economy, there can be no meaningful or significant development if only money is used or the capital market is relegated to the background.



This research is being conducted with the following goals in mind:

1. To assess the impact of privatization on capital market activity.

2. To ascertain the extent to which the privatization policy influenced capital-market investments.

3. Determine the post-privatization performance of the privatized companies.

4. To determine the economic objectives of Nigeria’s privatization policy.

5. To highlight the capital market implications of the privatization program.

6. To learn about the advantages of privatization and capital market operations in Nigeria.

7. To propose solutions to problems encountered during the privatization process and capital market operations in Nigeria.


Based on the observation of the capital market’s unpopularity during the first phase of the exercise, it will aid in determining the level of awareness, ownership, and investments that have emerged in the Nigeria Capital Market.

Aside from revealing the capital market’s development, operational efficiency, listings, and so on, it will aid in determining the profitability of the government’s privatization program on a broad scale and in specific terms on the capital market. A pre-privatization review and a post-privatization analysis will reveal the dividends, success, and benefits of the privatization program on the country as a whole, engendering ongoing support for the program.

Finally, it will flesh out great works already done on the subject and will serve as a reference guide for future researchers who wish to continue this analysis.


A hypothesis is a preliminary answer to a research question; it is frequently expressed as a relationship between a dependent variable and the explanatory variables. The hypotheses developed for this study are as follows:

Null Hypothesis (Ho): The privatization exercise in Nigeria did not improve the growth and performance of the Nigerian capital market.

Alternative Hypothesis (Hi): Nigeria’s privatization exercise has boosted the growth and performance of the country’s capital market.


The research on the impact of privatization on the Nigerian capital market will concentrate on the contribution of the privatization exercise to the growth of capital market activities, with market capitalization serving as a proxy or indicator of economic performance. The capital market activities to be recorded will be limited to the years 1980 to 2005. This 25-year period will serve as the study’s horizon.


In this study, special emphasis will be placed on the intensive use of data from secondary sources. Data will also be gathered from textbooks, journals, conference papers, the internet, the government, publications, magazines, financial papers, the Federal Offices of Statistics (FOS), and the Central Bank of Nigeria (CBN) Statistical Bulletin Vol. 16, December 2005. The Ordinary Least Squares (OLS) estimation method will be used to analyze the data.

This will allow us to test a hypothesis, provide necessary interpretations, and then draw conclusions based on our regression analysis. The OLS estimation method has some very appealing statistical properties that have helped it become a very popular method of analysis.


The following technical terms are succinctly explained:

i. Capital Market: A market in which industries, corporations, governments, and local governments raise medium and long-term funds.

ii. Privatization: The transfer of control and ownership of a business enterprise from the government to the private sector.

iii. Divestment: A business strategy in which a portion of the company is sold.

iv. Investment: The commitment of funds to long-term assets or projects that will yield returns over time.

v. Securities: These are marketable financial instruments such as equity and debt instruments that allow businesses and other organizations to raise capital from the general public.

vi. Financial Market: The medium by which funds are mobilized and efficiently transferred from surplus to deficit sectors of the economy.

vii. Money Market: The market for raising short-term funds that is dominated, controlled, and influenced by commercial bank activities.

viii. Shareholder: A member of a limited liability company who owns shares or equity capital in the company.



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