Abstract
This study seeks to determine the impact of capital market on economic growth in Nigeria using using annual data from 1981 to 2010. In our empirical analysis, we run an ordinary least square test to verify the statistical significance of the variables used and vector auto regression technique to determine the long run relationship within the variables in our study. Empirical investigations revealed that two variables are statistically significant at 10% and these variables are market index and market capitalization. Also the co- efficient value of these two variables suggest that a percentage increase in market index and market capitalization will bring about on the average 33.7 and 44.8 percentage increase in reel GDP. Our findings based on johanson (1995)co-integration technique and vector auto regression suggest three co-integrating equation at 5% level of significant while the vector auto regression suggest the existence of long run relationship between stock market and reel GDP and the stability in the system was also determined through the vector autoregressive technique. We therefore recommends that There is also need to restore confidence to the market by regulatory authorities through ensuring transparency and fair trading transaction and dealing in the stock exchange. It must also address the reported case of abuse and sharp practices by some companies in the market. There is also the need to boost the value of transactions in the Nigerian capital market, there is need for availability of more investment instruments such as derivatives, convertibles, future, and swaps options in the market. Given the present political dispensation, all the tiers of government should be encourage to fund their realistic developmental programme through the capital market. This will served as a leeway to freeing the resources that may be used in other sphere of the economy.
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