The Impact of the Capital Market on Investment in the Real Sector of the Nigerian Economy

Dubem Victor Enaruna and Okene, Anthony Jovwo (aca)
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Dubem Victor Enaruna: Nigeria Maritime University, Nigeria
Okene, Anthony Jovwo (aca): Nigeria Maritime University, Nigeria

International Journal of Research and Scientific Innovation, 2019, vol. 3, issue 11, 83-90

Abstract: Many efforts have been made towards understanding the relationship between the capital market and investment in the real sector of Nigeria. The objective was set to examine the impact of capital market on investment in Nigeria. The review of theoretical and empirical literature provided a basis for the selection and specification of model which was used to show if and how the capital market impacts investment growth. The data used in carrying out this research was sourced from the Central Bank of Nigeria statistical bulletin, 2016. The sample size employed for this study covers a period of 36 years (1981-2016). Preliminary tests were done such as Phillips-Perron unit root test for stationarity of the variables, the Johansen co-integration test was used to ascertain if there’s an equilibrium long run relationship between the variables. This study also uses the Error Correction Mechanism (ECM) to determine the impact of market capitalization, aggregate savings, new issues, interest and inflation rates on the gross fixed capital formation in Nigeria. The result of the study shows that the capital market has a significant impact on capital formation in Nigeria. The potentials of the capital market in fostering investment growth in Nigeria were evaluated by using forecasting techniques and it was seen that investmentwill drastically decline without an active capital market.On the strength of this evidence, one of the proffered recommendations is that government should introduce policies to encourage investors in the capital market.

Date: 2019
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