Impact of Stock Market Development on Economic Growth in Nigeria (1986–2025)

Abstract

Purpose: This study examines the impact of stock market development on economic growth in Nigeria from 1986 to 2025. Specifically, it investigated the effects of the All-Share Index (ASI), Volume of Transactions (VOT), and Market Capitalization (MCAP) on Real Gross Domestic Product (RGDP). Methodology: Annual time-series data obtained from secondary sources were analysed using the Augmented Dickey-Fuller (ADF) unit root test, Ordinary Least Squares (OLS), Error Correction Model (ECM), and Vector Autoregressive (VAR) techniques. Findings: The findings revealed that the All-Share Index had a negative impact on economic growth, while the Volume of Transactions also exhibited a negative relationship with RGDP. Conversely, Market Capitalization had a positive and statistically significant effect on economic growth, indicating its important contribution to economic performance in Nigeria. The results suggest that increasing the size and depth of the stock market can stimulate economic growth through enhanced investment opportunities and capital mobilization. Unique Contribution to Theory, Practice and Policy: Based on the findings, the study recommends that policymakers implement measures to increase market capitalization and strengthen investor confidence in the Nigerian stock market. In addition, listing requirements should be reviewed to encourage greater participation of small and medium-sized enterprises, thereby improving market activity and attracting both domestic and foreign investment.