Capital Market and Economic Development in Nigeria: Examining the Effects of Market Capitalization, All-Share Index, and Number of Deals
DOI:
https://doi.org/10.67487/ijmfg.v2i2.272Keywords:
Capital Market, Economic Development, Market Capitalization, All-Share Index, Number of Deals, GDP Per Capita, Dynamic Ordinary Least Squares, Nigeria.Abstract
This study examines the effects of selected capital market indicators on economic development in Nigeria over the period 1981–2022, focusing on the influence of market capitalization, the All-Share Index, and the number of deals on gross domestic product per capita (GDP per capita), which served as the proxy for economic development. Annual time-series data were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin and the Nigerian Stock Exchange (NSE) Annual Reports. The study adopted a quasi experimental research design and employed the Dynamic Ordinary Least Squares (DOLS) estimation technique after conducting unit root and Johansen cointegration tests to establish the stationarity and long-run relationship among the variables. The findings revealed the existence of a long-run equilibrium relationship between capital market indicators and economic development. The DOLS results showed that market capitalization exerted a positive and statistically significant effect on GDP per capita, indicating that an expansion in the size of the capital market promotes economic development. Conversely, the All-Share Index exhibited a negative but statistically insignificant effect, suggesting that fluctuations in stock prices did not significantly influence economic development during the study period. The number of deals was found to have a negative and statistically significant effect on GDP per capita, implying that increased trading activity did not necessarily translate into improved economic development, possibly due to speculative market activities. The study concludes that while the Nigerian capital market contributes to economic development, its developmental impact is driven primarily by market capitalization rather than stock price movements or trading volume. The study recommends policies aimed at deepening the capital market, encouraging productive long term investments, and strengthening market regulation to enhance the contribution of capital market activities to sustainable economic development in Nigeria.
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