IMPACT OF CAPITAL MARKET PERFORMANCE ON ECONOMIC GROWTH IN NIGERIA

ABSTRACT

This study examines the impact of Capital Market performance on economic growth of Nigeria for the period 1983 – 2010. Economic growth was proxied by gross domestic product while capital market performance was measured by market capitalization, total new issues, volume of transaction and listed equities. Data was collected using secondary source of data only. The technique employed was multiple regression as tool of analysis for the study. The findings of the study shows that the capital market performance has positively and significantly impacted on the Nigerian economy within the period of the study (1983- 2010). The study therefore, recommends among others that the Central Bank of Nigeria (CBN), the Nigerian Stock Exchange (NSE) and Security and Exchange Commission (SEC) should ensure free flow of information in the market. This is necessary in order to attract more investors and increase new issues which will automatically increase the quantum of market capitalization that will result in improving the performance of the Nigerian capital market.

CHAPTER ONE

INTRODUCTION

1.1 Background to the study

The Capital market in any country is one of the major pillars of long-term economic growth and development. The market serves a broad range of clientele, including different levels of government, corporate bodies and individuals within and outside the country. Capital formation entails accumulated savings out of the current incomes of either organization or individual. It is investment in fixed assets which in part is financed with monies raised through the capital market (Al-Faki, 2006). The Capital market has been one of the major means through which foreign funds are injected into most economies and the tendency towards a global economy is more visible there than anywhere else. It is therefore, quite valid to state that the growth of the capital market has become one of the barometers for measuring the overall economic growth of a nation (Emenuga, 1998).

The development of the capital market has generated two major sets of economic benefits. First, it has improved the allocation of capital, because the prices of corporate debt and equity respond immediately to shifts in demand and supply, changes in the outlook for an industry (and/or company) are quickly embodied in current asset prices.