Despite the crucial role of liquidity risk and treasury bill rates in shaping capital market outcomes, there is a significant gap in empirical research examining their specific impacts on the development of the Nigerian capital market. Given this foregoing, this study examines the effect of liquidity risk and treasury bill rate on capital market development using time series data spanning over a period of thirty-one (31) years 1993-2023. The study adopted the ex-post facto research design and the secondary data used in the study was sourced from CBN annual statistical bulletin for the relevant years. Descriptive statistics, Augmented Dickey Fuller Test (ADF), error correlation model and the Autoregressive Distributed Lag (ARDL) regression techniques were the main statistical tools used to analyse the data with the help of E-view 12 statistical package. The finding of this study revealed a significant negative relationship between liquidity risk and market capitalization in Nigeria's capital market, indicating that heightened liquidity risk tends to diminish market capitalization, aligning with the notion that increased risk discourages investor confidence and participation. Additionally, the findings highlight a negative correlation between current treasury bill rates and market capitalization, implying that increase short-term interest rates and consequently deter investment in the stock market. The study recommended that, to enhance Nigeria's capital market development, financial regulators should implement targeted reforms to mitigate liquidity risk and increase market liquidity, while policymakers should adopt a balanced approach to managing treasury bill rates to avoid deterring investment, taking into account both immediate and long-term effects.