Abstract
The objective of this study is to empirically examine the nexus between capital market and economic growth in Nigeria between 1980 and 2017. In the cause of pursuing the desired result, the economic growth was proxy by the gross domestic product (GDP) while the capital market variables considered included market capitalization, all shares index, number of dealings, gross capital formation, exchange rate, value of all transaction and interest rate. This study is predated by the ineffectiveness of capital market which affects liquidity, acquisition of information about firms such as risk diversification, savings harmonization and corporate management. In lieu of this, the research adopted Auto-regressive Distribution Lag model and Bound Cointegration Testing. The results revealed that there is long run relationship between capital market and economic growth in Nigeria. To justify the findings, post estimation tests were conducted. For instance, the Jarque-Beta test suggest that the residuals for both models are normally distributed since the probability value is greater than 5% significant level. Hence, the hypothesis of normal distribution for residuals cannot be rejected. The Breusch-Godfrey Serial Correlation (LM) test re-affirms that the hypothesis of no autocorrelation can be rejected since the probability value is greater than 5% critical value. Henceforward, the study recommends that government should expand the market technological based in order to further improve transactions and dealings, which could enhance its internationalization and competitiveness. Also, regulatory body like security and exchange commission (SEC) should improve its supervisory roles towards reducing shoddy and unethical dealings in the Nigerian capital market
Highlights
The overall growth of an economy depends on how efficiently and effectively her capital market performs, aided with smooth allocation and mobilization of funds. This is derived from it vital roles it plays through the appropriate fund channelization and financial intermediation strength of the sector by linking the surplus resources to deficit resources sector of the economy that is mobilization and allocation of funds that are germane to local investment drive (Alile, 1984)
Following questions: what is the relationship between capital market and the Nigerian economic growth? Secondly, what is the direction of capital market trend on economic growth indicator? While, the objective of the study is to empirically investigate the relationship between capital market and economic growth in Nigeria
The findings reveal that stock market really enhance economic, using the general-to-specific Autoregressive Distributed Lag (ARDL) /bound testing approach
Summary
The overall growth of an economy depends on how efficiently and effectively her capital market performs, aided with smooth allocation and mobilization of funds. This is derived from it vital roles it plays through the appropriate fund channelization and financial intermediation strength of the sector by linking the surplus resources to deficit resources sector of the economy that is mobilization and allocation of funds that are germane to local investment drive (Alile, 1984). Ekundayo (2002) posits that a nation need much of local and foreign investments to achieve sustainable economic growth and development Drawing from this assertion, the security market offers several means through which this is achievable and this essential role is important in determining the aggregate growth of the economy. With the previous consequential effect of poor capital market development which creates further problems for the nation’s development the present scenario of economic recession that disrupts potential rise in Nigeria’s economic growth
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