Capital Market and Nigeria’S Economic Growth (1980-2013)
This paper seeks to examine the impact of capital market on economic growth of Nigeria from the period of 1980-2013. This means that the operation of the capital market is an impetus for economic growth. Economic growth was proxied by Gross Domestic Product (GDP) while the capital market variables considered include: market capitalization(MCAP), total holdings of development stock (TDS) and total value of transaction (TVT). Applying the Augmented Dickey Fuller unit root test, the Johansen co-integration test and the Error correction mechanism technique (ECM), the unit root test results show that only total holding of development stock (TDS) in which the ADF value is -3.861686 and the critical value is -3.568379 at 5% level of significance was stationary at level but at first difference, all the variables became stationary at 5% level of significance. This implies that there is no possibility of spurious result. The cointegration test results show that Nigerian capital market and economic growth are cointegrated. This implies that a long run equilibrium relationship exists between capital market and economic growth in Nigeria. The Error correction mechanism test results suggest that an increase in the activities of Nigerian capital market with specific emphasis on total value of transaction (TVT) with P-value of 0.0409 will significantly enhance output in the country because the p-value is less than 0.05 at 5% level of significance while the coefficients of MCAP and TDS with p-values of 0.6720 and 0.7608 at 5% level of significance respectively were not statistically significant since their p-values are greater than 0.05. The coefficient of determination (R2 ) which shows that about 91.01% of the total changes in the economic growth (GDP) is attributable to changes in market capitalization, total value of transaction and total holdings of development stock. The evidence from this study reveals that the activities in the capital market tend to impact positively on the economy. It was concluded and recommended that the regulatory authority should initiate policies that would encourage more companies to access the market and also be more proactive in their surveillance role in order to check sharp practices which undermine market integrity and investors’ confidence.