Capital Markets, Economic Growth and Sustainable Development Financing: A Case Study of Nigeria

Oluwatosin Olushola, Ojijo Odhiambo, Pa Lamin Beyai


Unlike the Millennium Development Goals (MDGs) which were largely premised on the availability of external financing, in the form of Official Development Assistance (ODA), the Sustainable Development Goals (SDGs) are premised on a multiplicity of financing sources, with domestic resource mobilization (DRM), including through the capital markets, envisaged to play an increasingly important role. This study seeks to establish the impact of the capital market on the performance of the Nigerian economy and propose ways of enhancing its role in domestic resource mobilization for investments in SDG-related activities.  The study employs an enhanced version of the Neoclassical growth model, also known as Growth Accounting Framework, to incorporate other economic and financial variables such as capital market development indices, as well as some indices for the measurement of macroeconomic volatility. The study has established that, although the stock market development indices captured in the model, do not individually exert any significant effect on growth, jointly, they do have a significant impact on growth. Specifically, it is established that an estimated 61% of the changes in Real Gross Domestic Product (RGDP) is explained by all the variables explicitly captured in the model, and that all the explanatory variables are jointly statistically significant at 5% level of significance. The study makes a number of plausible policy options including the need to put in place the requisite policy measures and regulatory frameworks to ensure continuous development of the Nigerian capital market; the creation of an enabling environment to facilitate increased investments in the capital market; the need to enhance investor confidence by ensuring efficiency in the operations of the stock market; and the need to increase the diversity and complexity of investment instruments in tandem with developments in other stock markets and growing demands and expectations of investors and investment needs of the country.

Keywords: Nigeria, capital market development, economic growth, sustainable development goals

Article classification – Research paper


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