The interrelationship between financial institutions and capital markets is crucial and deeply intertwined. Financial institutions play a significant role in capital markets by directing capital efficiently. For instance, banks collect deposits and provide loans, which supports the smooth operation of capital markets.
Historically, financial institutions in Nigeria have also channeled capital outflows to less developed infrastructure due to limited local investment opportunities but with the Central Bank’s efforts, domestic market instruments such as debt and equity have been developed to provide local investment options and reduce reliance on foreign markets.