Capital Market Operations and Economic Growth in Nigeria

Abstract

The dynamic of capital market operations across the globe has become concerns to policy makers and stakeholders in both developed and developing economies of the World. Hence, this study examined the effect of capital market operations on economic growth in Nigeria for the period of 1986-2024. It sourced Time Series Data from Central Bank of Nigeria Statistical Bulletins (CBN, 2024) and International Monetary Fund (IMF, 2024). The study applied Descriptive Statistics and revealed that the data were normally distributed based on Jacque Berra Statistics and its p-values. Similarly, it employed Augmented Dickey Fuller (ADF) test which revealed mixture of order one and zero of variables that necessitated the choice of Autoregressive Distributed Lag model (ARDL). The ARDL F-bounds test reveals that long-run relationship exist among Market Capitalization, Value of Stocks Traded, Turnover Ratio, All Share Index, Inflation Rate and economic growth in Nigeria. Furthermore, long-run result revealed that Market Capitalization, Turnover Ratio and All Share Index have positive and statistically significant effect on economic growth in Nigeria, however, the value of stock traded is positive but insignificant .On the contrary, Inflation Rate (INF) has negative and insignificant effect on economic growth within the study period in Nigeria. On the part of short-run dynamism, ECM revealed the speed of adjustment that capital market operations and economic growth converged back to equilibrium point in 1year and 6 Months period. The short-run results capture the immediate effect of changes in capital market indicators on real gross domestic product (RGDP) in Nigeria. It also reveals that Market Capitalization, Value of Stock, Turnover Ratio and All Share Index have positive and statistically significant effect on economic growth in Nigeria. It concluded that capital market operations have positive effect on economic growth in Nigeria. Therefore, this study recommended that the federal government and regulatory authorities should implement monetary policy that encourage more companies to be listed on the stock exchange; it will expand market capitalization and enhance the market’s contribution to GDP, strengthen market liquidity by reducing transaction costs, improving transparency, and enhancing information dissemination to attract both local and foreign investors, regulatory oversight should be intensified to discourage speculative trading practices that distort market performance and weaken investor confidence and encourage financial literacy and investor education: Continuous education and awareness campaigns should be conducted to inform potential investors about the opportunities and risks in the capital market, thereby broadening participation and improving market depth in Nigeria.