The macroeconomic view of the capital market postulates that the market is affected by several macro-economic variables among which is inflation. Though, theoretically, capital market reacts to changes in inflation rate but the degree and direction have been a subject of debate of interest to academics, researchers, and policy makers. Therefore, this paper investigates the effect of inflation on capital market in Nigeria, using annual time series data obtained from the Central Bank of Nigeria and World Development Indicators for the years 1981-2018. The Canonical Cointegrating Regression(CCR) technique was applied to the data after descriptive analysis, augmented Dickey-Fuller (ADF) unit root and Johansen cointegration tests were conducted. Cointegration analysis indicates that a long run equilibrium relationship exists between inflation and capital market in Nigeria. The CCR estimates show evidence of a negative significant effect of inflation on capital market in Nigeria. Hence, Nigerian government should consciously embrace inflation-targeting monetary policy regime to stem the tide of rising inflation in Nigeria in order to reduce its negative effect on the Nigerian capital market.