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Evaluation of the Predictive Powers of Stock Market Performance on Industrial Development in Nigeria

John Okey Onoh, Chukwu Agwu Ejem, Ann Chinenye EffeNnamdi

Abstract

This study investigated the relationship between stock market performance and industrial performance in Nigeria, focusing on the extent to which capital market dynamics predict or contribute to the growth and development of the industrial sector. Despite the theoretical expectation that a vibrant stock market facilitates industrial expansion through efficient capital allocation and long-term financing, the Nigerian industrial sector continues to underperform amid periods of stock market growth. This study empirically examined the relationship using annual time series data spanning from 1985 to 2023. Key stock market performance indicators comprise market capitalization and all-share index were analyzed alongside industrial output data to evaluate their impact on Nigeria’s industrial sector. The study employed Generalized Method of Moments and Vector Autoregressive. The results indicated market capitalization has a positive and significant relationship with industrial performance, also All share index has significant relationship with industrial performance, though negative. All share index and industrial performance drives each other or have feedback effect. Meanwhile, market capitalization does not granger cause industrial performance, whereas, industrial performance does granger cause market capitalization, indicating unidirectional relationship. Impulse response results shows that industrial performance responds positively to own shock from first year to the end. industrial performance responds negatively from the shock of All share index from first to tenth year, but responds positively to shock from market capitalization from the first to tenth year. The speed of adjustment is 18.5% according the Vector error correction result, suggesting short term errors can be corrected in the long run with annual speed of adjustment of 18.5%%. The study recommends policy interventions to deepen market access for industrial firms,

Keywords

stock market performanceindustrial outputGMMVARNigeria

References

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