The effect of capital market on the Nigerian economy: An empirical analysis

Abstract

This study investigated the effect of capital market on the Nigerian economy from 1989 to 2019. Data for this study were collected from the Central Bank of Nigeria statistical bulletin 2019 and from the Nigerian stock exchange fact sheet. The Augmented Dicker Fuller (ADF) unit root test, Autoregressive distributed lag (ARDL) bounds test were used to evaluate the effect of capital market on the Nigerian economy. The Augmented DickerFuller (ADF) unit root test proved that the variables are integrated at levels and at first difference i.e I (0) and I (1) hence stationary. The ARDL test and bounds test reveals that long run relationship exists among the variables. The results revealed that in the long run, MCAP is significant and exhibits a positive relationship with GDP while ASI and TLS are significant but exhibits negative relationship with GDP and VTS also exhibits negative relationship with GDP but is not significant. It was then recommended that there is need to introduce and implement policies that will increase the level and size of market capitalization in the Nigerian capital market by the government through the regulatory agencies as increase in market capitalization will lead to increase fund availability for desired investment which in turn will increase productivity of the Nigeria economy.