Performance of the Equities and Bond Markets in Nigeria: A Comparative Investigation

Abstract

This work comparatively examined the performance of the Nigerian equities and bond markets vis-à-vis the output of the Nigerian economy from 1987 – 2019. Number of listed securities, number of deals, value of deals and market capitalization were the market performance indicators considered, while real GDP was used to measure output of the Nigerian economy. Data for the study were sourced from Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC) Statistical bulletins. The data generated for the study were subjected to stationarity test using ADF criterion, co-integration test using bounds approach, and diagnostic tests which covered testing for the presence of serial correlation, heteroscedasticity and distribution of the error term. Stationarity test result revealed that all the variables were integrated of order zero or one. Co-integration test result showed that a long-run relationship exists between the variables. Diagnostic test results indicated that both models were not serially correlated while the variances of the random variables were not heteroscedastic. However, the errors of the models were not normally distributed. Nevertheless, the ARDL model for parameter estimation process revealed that lagged real GDP, number and value of deals in the equities market have positive relationships with current period real GDP; while number of listed securities and market capitalization has negative relationships with real GDP. Additionally, only number of listed securities and number of deals in the equities market were statistically significant. In the bond market, all the variables except number of listed securities have positive relationships with real GDP, but none of the considered market performance indicators was statistically significant in the market. Nonetheless, the equities market has about 67.58% influence on real GDP in Nigeria; while bond market has about 45.22% influence on the country’s real GDP within the per

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