Abstract
The paper is an appraisal of the impact of capital market efficiency on economic growth in Nigeria, using time series data on market capitalization, money supply, interest rate, total market transaction and government development stock that ranges between 1961 to 2004. The model specification for the analysis of data is multiple regression and ordinary lest squares estimation techniques. The result of the study shows that the capital market in Nigeria has the potentials of growth inducing, but it has not contributed meaningfully to the economic growth of Nigeria. This is as a result of low market capitalization, low absorptive capitalization, illiquidity, misappropriation of funds among others. The empirical test indicates that, these variables satisfied the economic apriori and are statistically significant except total transactions and money. Thus it was concluded and recommended that, the capital market remain one of the mainstream in every economy that has the power to influence economic growth, hence the organize private sector is encourage to invest in it. This will enable the capital market improve its illiquidity status for economic growth and development. Therefore the government must contribute in order to achieve these objectives through investing government securities in productive sectors and relaxing laws that spell threat to the capital market.
Highlights
All aspects of human endeavour entail the use of money either self- generated or borrowed
This study reveals that there is a linkage between capital market efficiency and economic growth and development, vis-à-vis market capitalization, money supply, total transaction in stock, government development stock and interest rate
As it can be observed market capitalization, government development stock and interest rate are important capital market variables that are capable of influencing economic growth in Nigeria
Summary
All aspects of human endeavour entail the use of money either self- generated or borrowed. It is true that the rate of economic growth of any nation is inextricably linked to the sophistication of its financial market and its capital market efficiency. Equity markets in developing countries until the mid-1980s generally suffered from the classical defects of bank dominated economies that are shortage of equity capital, lack of liquidity, absence of foreign institutional investors, and lack of investor’s confidence in the stock market (Adebiyi, 2005). The importance of capital market lies in its financial intermediation capacity to link the deficit sector with the surplus sector of the economy. The absence of such capacity robs the economy of investment and production of goods and services for societal advancement. Funds could thereby be idle at one end, while being sought at the other end in pursuit of socio-economic growth and development (Akinbohungbe, 1996)
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