The Impact of Capital Market on the Nigerian Economy

Abstract

This research is on the impact of the Nigerian capital market on the Nigerian economy. The study seeks to determine the trend of capital market over the years, examine the relationship between capital market and economic growth, and to proffer recommendations based on the research findings. The secondary data source was used for this study regression analysis and correlation analyses were used to present the data and to find the significance and relationships between the different variables chosen. The result shows that there has been a steady rise in the macro economic variables considered i.e. gross domestic product, market capitalization, total shares traded, public capital expenditure, gross capital formation, openness (export plus import divided by GDP) and foreign direct investment. Also the R-squared value of 96% implies the total variation in Real GDP is being explained by the explanatory variables (i.e. MKT CAP, TST, PCE, GCF, OP and FDI). However, only openness and GCF are the significant factors contributing to Real GDP. Also correlation analysis shows a positive and significant relationship between Real GDP, market capitalization and total shares traded and are also significant at 1% level of probability. The policy implication of this is that gross capital formation and openness are veritable variables that will have impact on the Nigerian economy growth and development (GDP being used as a proxy for economic growth).

Keywords: Capital market, Gross Domestic Product, Gross capital formation, Foreign Direct Investment