Financial development and economic nexus in Nigeria role of the stock market

Financial development and economic nexus in Nigeria role of the stock market

Author by Dr. Peter Ogbebor

Journal/Publisher: International Journal Of Research & Methodology In Social Science

Volume/Edition: 4

Language: English

Pages: 29 - 47

Abstract

The stock market has been touted as catalyst for economic growth as a result of its capacity to
provide access to long term capital for industrialization and other projects requiring long term
capital, especially in developing countries as Nigeria. In order to establish the pattern of the
finance-growth nexus in Nigeria by adopting a time series technique and applying regression model
estimation, this study sought to evaluate how the stock market has impacted economic growth in
Nigeria following the recent liberalization and the subsequent market integration resulting from
globalization. The study found long run relationship between the Gross Domestic Product per
Capital Growth Rate (GDPGR) and the explanatory variables (stock market capitalization ratio;
total value of shares traded, stock turnover ratio and financial liberalization). The Granger Causality
Test results showed that there is a bi-directional relationship that runs from turnover ratio (TNVR)
to stock market capitalization 9SMCR) and vice versa within 5% and 10% level of significance.
Also, the results also showed that gross domestic product per capital growth rate (GDPGR), stock
market capitalization ratio (SMCR), total value of shares traded (STR), and financial liberalization
(FINLIB) jointly have causal effects on stock turnover ratio 9TNVR).The study concluded that
economic growth and development has not been found invariant to dis-equilibrium in the stock
market in Nigeria. It was, therefore, recommended that a policy rethink should be fashioned out to
strengthen the stock market so as to enable it to play its pivotal role in the economic growth and
development of Nigeria.


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