STOCK MARKET EARNINGS AND ITS IMPACT ON NIGERIAN ECONOMY

Abstract

The stock market provides equity and a direct finance to potential investors for purposes of economic growth and development it enhances the efficiency of capital formation and allocation of resources and provides long-term capital for economy. The main objective of the study is to provide empirical evidence of the effect of stock market earnings on Nigeria’s economic growth. Hypotheses were set and model designed to fit the variables on equation line. Data were sourced from secondary sources mainly from Nigeria Stock Exchange Fact Book, Security and Exchange Commission Fact Book, National Bureau of Statistics and Central Bank of Nigeria Statistical Bulletin (various editions). The data was collected in annual time-series from 1991 to 2016. It was manipulated using Ordinary Least Square (OLS) Method and Phillip-Perron Unit Root Test using E.View 9.0..From the regression results, it was discovered that Market Capitalization has a positive and significant effect on gross domestic product which is the proxy for economic growth with the probability value of less than 10 percent under 0.05 significant level. It then mean that Nigeria Stock Market activities (as represented by Market capitalization-MC, Price Earnings Ratio-PER and Dividend Yield-DY) has positive influence on economic growth (GDP).Therefore in view of the findings, it is recommended that there should be improvement in the dealing market capitalization by encouraging more foreign investors to participate in the market, maintain and improve it state of technology like automated trading and settlement practices, electronic fund clearance and eliminate physical transfer of shares.