The Effects of Stock Market on Economic Growth and Development of Nigeria

Abstract

This research study seeks to examine whether the stock market promotes economic growth and development in Nigeria. The stock market is a common feature of a modern economy and it is reputed to perform some necessary functions, which promote the growth and development of the economy.

To achieve this objective, Ordinary Least Squares regression (OLS) was employed using the data from 1984 to 2008. The results indicated that there is a positive relationship between economic growth and the stock market development variables used. With almost 95.77 percent R-squared and 94.92 percent adjusted R-squared, the result showed that economic growth in Nigeria is adequately explained by the model for the periods of 25 years (i. e. from 1984 to 2008). By implications 95.77 percent of the variation in the growth of economic activities is explained by the independent variables.

The results of the research, established positive links between the stock market development and economic growth, suggests the pursuit of policies geared towards rapid development of the stock market. Also, all sectors of the economy should act in a collaborative manner such that the optimum benefits of linkages between stock market and economic growth can be realized in Nigeria.

Keywords: Nigeria, Stock Market, Economic Growth