Stock Market Performance and Economic Development in Nigeria

Abstract

This study examines the effect of stock market performance on economic development in Nigeria from 1993 to 2024. The study utilized stock market indicators such as the logarithm of the number of listed companies, market capitalization to GDP ratio, value of shares traded to GDP ratio, and stock market turnover ratio, while economic development was measured using real GDP per capita growth. Secondary data were sourced from the World Bank World Development Indicators. The study employed descriptive statistics, KPSS unit root tests, ARDL bounds cointegration tests, ARDL short and long-run estimation, Granger causality tests, and post-diagnostic tests for analysis. The KPSS results showed that the logarithm of the number of listed companies ws integrated of order one, while other variables were integrated of order zero. The ARDL bounds test confirmed the existence of a long-run relationship among the variables. The long run findings revealed that the number of listed companies had a positive and statistically significant effect on real GDP per capita growth. Market capitalization ratio and value traded ratio showed positive but not significant relationships with real GDP per capita growth, whereas turnover ratio exhibited a negative but not significant effect. The error correction coefficient was negative and statistically significant, indicating rapid adjustment toward long-run equilibrium. The study concluded that broader market participation and improved stock-market liquidity could strengthen the contribution of Nigeria’s capital market to economic growth. It recommended policies that encourage new listings, improve market efficiency, and channel capital-market resources toward productive investment.