Econometric Analysis on the Impact of Capital Market Performance on the Nigerian Economy

Okwuchukwu Odili and Ikenna Jude Ezeudu

International Journal of Financial Economics, 2014, vol. 2, issue 4, 181-190

Abstract: This study investigates the impact of stock market performance on economic growth in Nigeria. Time series data from 1980-2002 on market capitalization, value of shares traded, all share index, average prime lending rate, inflation rate, national savings and Gross domestic product, proxy for economic growth were sourced from Central Bank of Nigeria statistical bulletin and Nigerian Stock Exchange Fact book various issues. The data were analysed using ordinary least square (OLS) regression techniques. The error correction mechanism (ECM) was employed to determine the short-run and long-run effects of stock market performance on economic growth in Nigeria. The results show that stock market has positive and significant effect on economic growth in Nigeria. It also revealed that market capitalization has negative but significant relationship with gross domestic product. It was recommended amongst others that there is a strong need for policy makers to focus on policies that will deepen and strengthen the stock market to increase its liquidity and attract foreign investors. The need for appropriate policy measures that will guide fund allocation by capital market operators to ensure that long term funds are channeled towards long-term investments is imperative.

Keywords: Nigerian stock market; gross domestic product; error correction model; fund mobilization and allocation. (search for similar items in EconPapers)
Date: 2014
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