Capital Market Development and Economic Growth in Nigeria: A Re-examination

Abstract

Efficient and effective capital market is one of the essential ingredients of economic growth and development. Without an efficient capital market, mobilization of savings and investment of such savings on long term basis; economic development of a nation may be hinder. Capital market as a major part of financial market which serves as a pivot to service the deficit unit, is very critical to economic growth. This paper re-examines the Nigerian capital market and its impact of economic growth using Autoregressive Distributive lag (ARDL). Employing data from Nigerian Security and Exchange Commission, Central Bank of Nigeria and Nigerian Stock Exchange from 1981-2016, it found that in the long run, accumulated effect of market capitalization and value of stock on economic growth is negative and statistically significant. By inference, market capitalization and value of transactions in the Nigeria stock market may not be considered adequate. It also found that volume of transaction in the capital market has significant positive impact on economic growth. Hence, there is no significant contribution of market capitalization and value of stock to economic growth while importance of volume of transaction in the capital was evidence. It recommends that for optimal allocation of resources towards sustainable economic growth, market capitalization and total value of stock traded should receive a boost through more entrance of local and foreign investors with huge investment base to increase volume of trading which shows significant and positive relationship with economic growth.

Keywords: Capital Market, Stock Value, Market Capitalisation, Volume of Transaction, Economic Growth