Capital Market and Economic Growth of Nigeria

Abstract

This paper examines the impact of the capital market on the Nigerian economy from 1981-2011. For this study, the Nigerian economy was viewed in terms of economic growth, while the performance of the stock market is an impetus for the growth and development of the Nigerian economy. The economic growth was proxy by Gross Domestic Product (GDP), while the capital market variables considered were; Market capitalization (MCAP), Total New issues (TNI), Value of Transactions (VLT), and Total Listed Equities and Government Stocks (LEGS). Johansen co-integration and Granger causality tests were applied. The result shows that the Nigerian capital market and economic growth are co-integrated. This indicates that a long run relationship exist between capital market and the growth of the Nigerian economy. The result shows the clear relative positive impact the capital market plays the economic growth and invariably on the economy. It is recommended that all the tiers of government should be encouraged to fund realistic developmental programs through the capital market for it t serve as a leeway to freeing resources, of the economy and there is need for availability of more investment instruments such as: derivatives, convertibles, future and swaps options in the market, the regulatory authority should be more proactive.

Keywords: Capital Market, Economy, Economic Growth, Cointegration, Causality, Nigeria.