European Journal of Accounting, Finance and Investment

Capital Market Development And Economic Growth In Nigeria: Any Nexus?

OSAYI, Valentine Igbinedion, Ph.D, PGDE, FCILRM, FERP

Lecturer, Department of Banking and Finance, Federal University, Wukari, PMB 1020,Wukari, Taraba State, Nigeria.

IGYE, Udiaka Utingye

Department of Banking and Finance, Federal University Wukari, Taraba, Nigeria

Keywords: Capital Market Development, Market Capitalisation, Economic Growth

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Abstract

The Nigerian capital market plays a crucial role in economic growth by providing a platform for investors to channel surplus savings into productive investments. This study examines the impact of the capital market development on economic growth in Nigeria from 1990 to 2021. Using a longitudinal causal research design and the ordinary least square estimation technique, the study hypothesizes that capital market development does not significantly impact on economic growth in Nigeria, with the capital market development measures as total market capitalization, number of deals, value of transactions, and interest rates while economic growth was measured by the real gross domestic product in Nigeria. The findings suggest that while total market capitalization does not significantly impact economic growth, the number of deals has a positive and significant esffect on economic growth in Nigeria. This implies that an increase in market transactions is associated with higher economic growth. However, the value of transactions shows a negative and significant impact on economic growth, contrary to expectations. Additionally, interest rates have a strong and significant effect on economic growth, with higher interest rates leading to the attractions of massive investments in the market. Based on the foregoing findings, the study recommends among other measures, the enhancement of market efficiency and integrity by strengthening regulatory oversight, increasing the number of transactions, managing interest rates effectively in order to further encouraging investors’ confidence in the market. Overall, the study highlights the importance of a well-functioning capital market in driving economic growth and provides valuable insights for policymakers and market participants in Nigeria.

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