Bond Market Development and Economic Growth in Nigeria (1982-2014). A Gmm Approach

Abstract

There has beenan upsurge in bond market trading in Nigeria since the advent of civilian rule.However, there are concerns over whether or not bond market trading have anysignificant effect on the Nigerian economy. This study sought to: (i(i) toanalyze the impact of Bond market development on the economic growth of Nigeria (ii) ascertain the direction of causalitybetween bond market development and economic growth in Nigeria. Annual timeseries data were sourced from Central Bank of Nigeria Statistical Bulletinvarious issue and World Development Indicators (WDI) (2014) edition of theWorld Bank for the period 1982-2014. We employed both Generalized Method ofMoment (GMM-IV) Instrumental variables estimator and Granger Causality Test toexamine relationship between bond market development and economic growth inNigeria. Result from the study revealed that bond market bond market havepositive but statistically insignificant effect on economic growth in Nigeria(β= 0.0148; t = 0.4106).  It was alsodiscovered that there is no causal relationship between bond market and economicgrowth in Nigeria. It is therefore recommended, amongst others, that Nigerianbond market be deepened by instituting incentives that can attract corporatepatronage and intuitional investors.Keywords: Bond Market, Economic Growth, GMM, Granger Causality.