IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 3 NO. 3 2018

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An Empirical Analysis of Capital Market as a Tool for Economic Growth in Nigeria

Monday A. Gbanador AND Brenda N. Gbanador

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Abstract

This study investigates the impact of Capital Market on economic growth in Nigeria using a time series data from 1985 to 2017. The ordinary least square (OLS) regression was utilized using data that were collated from the CBN statistical bulletin. The Gross domestic product was used as proxy for economic growth while Market capitalization, Value of transaction and the all shares index were used as proxy for capital market variables. The findings from the study revealed that capital market has significant impact on economic growth. Furthermore, the study provides evidence that market capitalization exert positive impact in explaining and predicting economic growth in Nigeria. Thus, the study concluded that this variable played a significant role in influencing the capital market performance on Nigeria’s economic growth. On the other hand, the value of transaction and all shares index do not have significant impact on the growth of the economy. The reasons for this result could be attributed to the quality of quoted stocks, weak form market efficiency and the underdeveloped nature of the Nigerian Capital market. The study therefore recommend that the security and exchange commission (SEC), the Nigerian stock exchange (NSE) and other relevant agencies should ensure that the stock market is fully automated to enable market participants have easy access to the relevant information about the market and its activities. To boost the value of transactions and liquidity in the Nigerian capital market, there is need to introduce more investment instruments such as derivatives and cross-border quotation. Furthermore, SEC should restore confidence in the market by ensuring transparent and fair trading.

keywords:

Economic growth; Nigerian Capital market; Market capitalization; All shares index; Gross Domestic Product; Market efficiency

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