Real Sector, Gross Fixed Capital Formation and the Nigerian Stock Market

Abstract

The main objective of the study is to determine the impact of the capital market on the real sector growth and development in Nigerian economy. The critical question that readily comes to mind however, bothers on the extent to which the real sector has been able to access funds from the Nigerian capital market. Co-integration technique was used for data analysis. The long-run results reveal that the stock market of which capital formation – market capitalization, gross fixed capital formation, new issues, and All Share Index are components – has very strong impact on the growth and development of the real sector of the Nigerian economy which therefore implies that a vibrant capital market will serve as a catalyst to the growth and development of the real sector and the economy of Nigeria. Based on the findings, it is recommended that in order to contribute meaningfully to the growth and development of the Nigerian economy, there stems the urgent need to adequately fund the real sector, as it forms the main driving force for the country’s GDP coupled with large scale employment generation, through the capital market. This can be achieved with capital market instruments such as bonds. Real Estate Investment Trusts, and other colaterised securities. In addition, an enabling environment should be created through more reform programmes to deepening the market and thus pave way for more long term funds, for real sector development.

Key words: Real sector, capital market, Gross Fixed Capital Formation (GFCF), Market

Capitalization and Gross Domestic Product (GDP)