AN ASSESSMENT OF THE IMPACT OF STOCK MARKET DEVELOPMENT ON ECONOMIC GROWTH IN NIGERIA.

ABSTRACT

This study examines the impact of stock market development on economic growth in Nigeria using annual time series data covering the period between 1980 and 2019. The techniques employed are Augmented Dickey Fuller unit root test, Johansen Cointegration Analysis, Ordinary Least Square and Granger causality test. The unit root test results show that all variables are not stationary at levels but became stationary at first difference i.e. I(1) variables. The Cointegration test indicated the existence of long-run relationship between stock market development and economic growth. The ordinary least square results show that there is significant relationship between stock market development variables and economic growth in Nigeria. Specifically, there is positive and significant relationship between market capitalization and number of deals with economic growth while all share index and value of stocks traded have an inverse and significant relationship with economic growth. Market capitalization appears to be the major stock market indicator. The result of the Granger causality test result indicates the existence of unidirectional causal relationship between market capitalization and value of stock traded with economic growth and not vice-versa. The results further show a bi-directional causal relationship between the number of deals with economic growth and vice-versa. Based on these findings government should address the shortage of investment assets through effective policy measures that enhance the performance of stock market and to restore confidence of the investors.

Keywords: stock market development, economic growth, Co-integration, Ordinary Least Square, Granger causality.