The Impact of the Nigerian Capital Market on Economic Growth (1990-2010)

F.T Kolapo, A .O Adaramola


This paper seeks to examine the impact of the Nigerian capital market on its economic growth from the period of 1990-2010. This means that the performance of the stock market is an impetus for economic growth and development. The economic growth was proxied by Gross Domestic Product (GDP) while the capital market variables considered include; Market Capitalization (MCAP), Total New Issues (TNI), Value of Transactions (VLT), and Total Listed Equities and Government Stocks (LEGS).  Applying Johansen co-integration and Granger causality tests, results show that the Nigerian capital market and economic growth are co-integrated. This implies that a long run relationship exists between capital market and economic growth in Nigeria. The causality test results suggest a bidirectional causation between the GDP and the value of transactions (VLT) and a unidirectional causality from Market capitalisation to the GDP and not vice versa.  The F statistics is significant at 5 percent using a two-tailed test. On the other hand, there is no “reverse causation” from GDP to market capitalization. Furthermore, there is independence “no causation” between the GDP and total new issues (TNI) as well as GDP and LEGS.  This is a clear indication of the relative positive impact the capital market plays on the economic growth of the country. The evidence from this study reveals that the activities in the capital market tend to impact positively on the economy.  It is recommended therefore 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 erode investors’ confidence.


impact, stock market performance, capital market, economic growth, Nigeria

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International Journal of Developing Societies

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