IMPACT OF CAPITAL MARKET DEVELOPMENT ON ECONOMIC GROWTH IN NIGERIA
IMPACT OF CAPITAL MARKET DEVELOPMENT ON ECONOMIC GROWTH IN NIGERIA
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Date
2015-07
Authors
DANKAWU, MARYAM UBALE
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Abstract
ABSTRACT
The Nigerian financial system experienced series of reforms and amidst these reforms an
important component of the sector, the capital market has demonstrated an impressive
performance evidenced from its growth especially in the last decade. Coupled with this
development, the Nigerian economy has also experienced growth which did not
significantly translate into positive improvements in employment, and poverty reduction.
This study examined the relationship between capital market development and economic
growth in Nigeria. It tests the competing finance-growth nexus hypotheses using Granger
causality tests in a Vector Auto regression framework over the period 1981-2012. The
study also examined the impact of capital market development on economic growth in
Nigeria and tested for the evidence of long run relationships. Annual data on some capital
market development indicators and real growth domestic product were collected and used
for the study. The empirical results from causality test at lags 7 show that value of
transaction and turnover ratio each drives real GDP with no reverse or feedback effect.
Thus, this supports the evidence of unidirectional causal link from these two indicators to
real gross domestic product. In essence, the general causality results reveal some evidence
that capital market development causes economic growth in Nigeria as shown by some of
the capital market development used in this study. The co-integration results imply that
there exists a significant long-run relationship between capital market and economic
growth. There exist four significant co integrating vectors or four different linear
combinations of the capital market indicators that can drift together roughly at the same
time with the RGDP. The study recommends among others the need for availability of
more investment instruments such as derivatives, convertibles, future, and swaps options
in the Nigerian capital market in order to boost the value of transactions. Also, it is
recommended that all the tiers of government should be encouraged to fund their realistic
developmental programmes through the capital market. This will help in boosting the
activities of the capital market, as well as the financial sector. Hence, it will redirect the
resources that may be used in other spheres of the economy.
Description
BEING A THESIS SUBMITTED TO THE POSTGRADUATE SCHOOL,
AHMADU BELLO UNIVERSITY, ZARIA, IN PARTIAL FULFILLMENT OF
THE REQUIREMENTS FOR THE AWARD OF MASTER DEGREE OF
SCIENCE IN ECONOMICS
Keywords
IMPACT, MARKET, CAPITAL, DEVELOPMENT, ECONOMIC, GROWTH, NIGERIA