Abstract
A developing nation like Nigeria needs huge capital outlay to finance the needed infrastructures and capital investments necessary to drive the economy. This study lays much emphasis on whether the banking industry is really financing capital investment thereby contributing immensely to the development of the economy. It also looks at the contribution of financial institutions in promoting the development of the stock market thereby mobilizing fund that will enhance manufacturing of goods. Data were collected from the CBN statistical bulletin spanning a period of 32 years (1981 – 2012). The data collected were analysed with regression using e-view software. It was discovered that the banks have contributed much in financing capital investments and stock market development in Nigeria. It was recommended that financial institutions should be encouraged to mobilize more deposit for lending that will aid capital investment. While the Central Bank on the other hand should reduce its minimum rediscounting rate.