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Effect of Capital Market Financing on Economic Growth of Nigeria

Aniefor, Sunday Jones Amahalu, Nestor Ndubuisi

Abstract

This study examined the effect of capital market financing on economic growth in Nigeria from 2011 to 2020. The specific objectives of this study are to determine the effect of the explanatory variables captured with equity financing, bond financing and hybrid financing on gross domestic product (as a measure of economic growth). Time series data from 2011 to 2020 relevant to this study were collected from the Office of the Securities and Exchange Commission, National Bureau of Statistics and Central Bank of Nigeria statistical bulletins. The Augmented Dickey- Fuller unit root test was employed to establish the stationarity of the variables. Descriptive statistics of the data was carried out while inferential statistics; Pearson Coefficient Correlation, Ordinary Least Square method of regression, Granger Causality test and Johansen Cointegration test were utilized in analyzing the models via E-Views 9.0. The findings were that, there is evidence of long run equilibrium relationship between capital market financing and economic growth in Nigeria during the period studied. The specific capital market financing variables; which are equity financing and hybrid financing hav e significant positive effect on gross domestic product at 5% level respectively while bond financing has a significant negative effect on gross domestic product of Nigeria at 5% level. It was therefore recommended that there is need for the government through the central bank to implement policy that will increase the level and size of equity finance in the capital market. The implication of the findings is that an increase in capital market financing will provide the needed funds for investors for further investments and hence increased productivity in Nigeria.

Keywords

Equity Financing Bond Financing Hybrid Financing Gross Domestic Product

References

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