Abstract
The role of the capital market in the growth and development of any economy need not be over-emphasized. The capital market is a complex institution and mechanisms through which economic units desirous to invest their surplus fund, interact directly or through financial intermediaries with those who wish to procure funds for their businesses. The Nigerian capital market started operations in mid-1961 with eight stocks and equities; with about seven United Kingdom (UK) firms quoted on the Nigerian Stock Exchange (NSE) which had, at the same time, dual quotations on the London Stock Exchange. This study examined the impact of the capital market on economic growth in Nigeria from 1981 to 2018. The expo facto research design was adopted for this study. The time-series data for the study were sourced from CBN statistical bulletin. Autoregressive Distributed Lag (ARDL) was used with the aid of e-view 10 software. The ARDL Bounds test revealed the existence of a long-run relationship among the variables. The result revealed that market capitalization has positive and insignificant effects on economic growth both in the short and long run. There is unidirectional causality among the variables. The study recommended that regulatory authorities should restore confidence in the market by ensuring transparency and fair trading dealings and transactions in the market to enhance economic growth. There should be an improvement in the moribund market capitalization, by encouraging more foreign investors to participate in the market, maintain a state of the art technology like automated trading and settlement practices, electronic fund clearance, and eliminate physical transfer of shares.
Highlights
The role of capital market in growth and development of any economy need not to be over emphasized
The study on capital market and economic growth in Nigeria from 1981-2018 is of great important to the Nigerian economy. This is because capital market plays an important role in the growth process of the economy
The result revealed that market capitalization has positive and insignificant effects on economic growth both in the short and long run
Summary
The role of capital market in growth and development of any economy need not to be over emphasized. Okereke (2000) describes the capital market as constituting of market and institutions that facilitates the issuance and secondary trading of long-term financial instruments. Unlike the money market that represents the short-end of financial system that provides facilities for claims and obligations with maturity vary from one day to a year, the capital market provides government at all levels an effective way of financing public projects; playing a vital role in stimulating industrial as well as economic growth and development. The theoretical framework on the effects of capital market on economic growth dates back to the work of Schumpeter, (1911) which explained that a well- developed financial system can facilitate technological innovation and economic growth through the provision of financial services and resources to investors. The paper has five-sections, namely introduction, literature review, methodology, results and discussion; and conclusion and recommendations
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