The Extent of Relationship between Stock Market Capitalization and Performance on the Nigerian Economy

Abstract

This paper examines the extent of relationship between stock market capitalization and performance on the Nigerian economy. Problems identified include the difficulty experienced in raising needed capital to finance key sectors of the Nigerian economy; the stock market is shallow in addition to low activities etc. The objectives included primarily to determine the extent of relationship between stock market capitalization and performance on the Nigerian economy, to access the effect of stock market capitalization and make policy recommendations. Hypothesis tested was that, there is no significant relationship between stock market capitalization and the performance of the Nigerian economy (1988-2008). Data was collected from secondary sources and was analyzed using multiple regression statistics. From the findings, results showed that there is a strong relationship between stock market capitalization and performance on the Nigerian economy with 91 percent (91%) degree of relationship. 1988 was identified as significant, as the year which marks the entrance of equity stocks in the capital market and by 2007, market capitalization hits ?13 trillion. The paper is presented in five sections: - (1) Introduction which includes statement of the problem, Objectives and hypothesis. (2) Brief selected literature review (3) Model and Methodology. (4) Data Presentation, Discussion and Findings.  (5) Conclusion and policy recommendations. The paper concluded that, when the stock market is reasonably traded by public and private sectors with protected legal frameworks, the Nigerian economy will be more expanded for high growth. It was recommended among others, that the Federal Government of Nigeria should set up a stimulus account to boost the stock market and to enforce Degree No. 45 of 1999 for the establishment of the Commodity Exchange Market.

Keywords: Stock market, Nigerian Stock Exchange, Market Capitalization, Performance of the Nigerian Economy, Securities.