Capital Market Operations and SMEs’ Financing in a Developing Economy: A Conceptual Evaluation of the Nigerian Stock Market

Abstract

This study evaluated the capital market operations vis-a-vis SMEs’ financing in Nigeria. The fundamental objective of this study was to assess how the capital market enables organisations, particularly the small and medium scale enterprises (SMEs), raise medium to long-term finance. It was observed that the financial accessibility has been a key challenge to SMEs’ growth in many developing economies. The issue of SMEs’ funding need to be addressed with swiftness, given the importance of SMEs to Nigeria and the global economy in general. This study will stimulate increased interests in the trading of SMEs’ stocks at the floors of the stock markets in many developing countries. The study therefore evaluated the reforms agenda of the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) which were targeted at mitigating the challenges of SMEs’ financing. The study concluded that there is need to develop a culture of venture capital and private equity in Nigeria. The study recommended that using the capital market to finance the SMEs in the developing economy should not be a matter of choice but a part of the operating environment in the country’s financial system, especially in this contemporary regime of fairer trade in goods and services. The Nigerian stock market needed to be built up with mass participation of SMEs to attain a meaningful sustainable growth and development. There are also needs to formulate investment friendly regulations; keep low inflationary rate; provide favourable government policies and provide stable macroeconomic framework for the sustainability of informal and SMEs sector in the developing countries.

Keywords: capital market operations, Nigerian financial system, small and medium enterprises (SMEs) financing, stock market.