Effect of Capital Market Performance on Economic Growth

Abstract

This study examines the effect of capital market performance on economic growth in Nigeria from 1999 to 2024. Using annual time series data obtained from the Central Bank of Nigeria (CBN), Securities and Exchange Commission( SEC), the Nigerian Exchange Group (NGX),) and National Bureau of Statistics (NBS), the research employs the Autoregressive Distributed Lag (ARDL) model to explore both short-run and long-run dynamics between Gross Domestic Product (GDP) and capital market indicators, including Market Capitalization (MCAP), All Share Index (ASI), Value of Transactions (LVT), Number of Listed Securities (NLS), and New Issues (NI). Descriptive statistics and unit root tests confirm data suitability for ARDL estimation. The findings reveal a significant long-run relationship between capital market performance and economic growth, with MCAP, ASI, and LVT exerting positive and substantial effects on GDP, while NLS and NI show weaker short-term contributions. Diagnostic tests affirm model robustness and absence of serial correlation or heteroskedasticity. The study concludes that an efficient and liquid capital market stimulates sustainable economic expansion by enhancing investment flows and resource allocation. It recommends strengthening regulatory frameworks, deepening market participation, and promoting financial innovation to improve market efficiency for sustained growth in Nigeria.