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TOPIC : THE ROLE OF CAPITAL MARKET IN ECONOMIC GROWTH OF NIGERIA (2010Q1 -
2016Q1). Also Available for (1986 - 2013)
The capital market is a highly specialized and organized
financial market and indeed essential agent of economic
growth and development (Odetayo and Sajuyigbe, 2012;
Okoye and Nwisienyi, 2013) because of its ability to
facilitate and mobilize saving and investment (Okodua
and Ewetan, 2013; Donwa and Odia, 2010). Shallu (2014)
describes the capital market as a market where borrowing
and lending of long term funds takes place involving
both debt and equity like shares, debentures, bonds
etc. She points that capital market plays a very important
role in promoting economic growth through the mobilization
of long-term savings and the savings get invested in
the economy for productive purpose. According to Adekunle
et al (2016) the stock market enables government and
industry to raise long-term capital for financing new
projects and expanding or modernizing industrial and/or
Yadirichukwu and Chigbu (2014) state that capital market
contributes to economic growth through the specific
services it performs either directly or indirectly,
notable among these functions are: mobilization of savings,
creation of liquidity, risk diversification, improved
dissemination and acquisition of information, and enhanced
incentive for corporate control. Liliana (2014) reveals
that deep capital markets in emerging market economies
support efficient allocation of resources by complementing
banks’ financial intermediation role, they can
increase economic agents’ capacity to manage financial
risks and their resilience in the face of unexpected
shocks. Also, he states that deep capital markets foster
firms’ financial integrity through market discipline
and the need to comply with internationally accepted
standards on accounting practices, transparency and
governance, among others. Adeusi, et al. (2013) opine
that capital market is a driver or lubricant that keep
turning the wheel of the economy to growth and development
because of its imperative function of not just mobilizing
long term funds and channelling them to productive investment
but also efficiently allocating these funds to projects
of best returns to fund owners. However, from a microeconomic
perspective, Kaserer and Rapp (2014) argue that the
positive impact of stock markets is related to two major
channels: (i) availability of funds for long-term risky
investments; and (ii) incentives for improving corporate
governance. They provide new evidence for both effects,
highlighting the importance of stock markets for financing
of innovations and for attracting independent institutional
To a great extent, the positive relationship between
capital accumulation and real economic growth has long
been affirmed in economic theories (Anyanwu, 1996; Osamwonyi
and Kasimu, 2013). Success in capital accumulation and
mobilization for development varies among nations, but
it is largely dependent on domestic savings and inflows
of foreign capital (Osamwonyi and Kasimu, 2013; Okoye
and Nwisienyi, 2013). Therefore, to arrest the menace
of the current economic downturn, effort must be geared
towards effective resource mobilization. It is in realization
of this that consideration is given to measures for
the development of capital market as an institution
for the mobilization of finance from the surplus sectors
to the deficit sectors (Adeusi, et al. 2013).
Owolabi and Ajayi (2013) posit that the links between
saving, capital formation and economic growth on the
one hand and direction of causality on the other, still
remain subject to further analysis across countries
stressing that accepting that the relationship is unidirectional
(i.e. moving from savings to investment and hence to
economic growth) may be misleading. Therefore, this
project work will examine the role of the capital market
in harnessing and mobilizing these resources to generate
economic growth in the country and consequently, economic
OF THE PROBLEM
There is abundant evidence that most Nigerian businesses
lack long-term capital. According to Donwa and Odia
(2010), the paucity of long-term capital has posed the
greatest predicament to economic development in most
African countries including Nigeria. The business sector
has depended mainly on short-term financing such as
overdrafts to finance even long-term capital. Based
on the maturity matching concept, such financing is
risky. All such firms need to raise an appropriate mix
of short- and long-term capital (Demirguc-Kunt and Levine
Although, most recent literatures on the Nigerian capital
market have recognised the tremendous performance the
market has recorded in recent times, Ngerebo and Torbira,
(2014) reveal that there are two divergent opinions
on the role of capital market activities in Nigeria;
the first view is that capital market activities synchronize
the divergent preferences of portfolio managers and
financial institutions and those of savers by mobilizing
long-term funds; the alternative view is that the capital
market merely promote investment in consumer goods and
not the acquisition of new fixed assets that are invested
rather than consumed. However, the vital role of the
capital market in economic growth and development has
not been comprehensively investigated thereby creating
a research gap in this area. This study is undertaken
to examine the contribution of the capital market in
the Nigerian economic growth and development. Aside
the social and institutional factors inhibiting the
process of economic development in Nigeria, the bottleneck
created by the dearth of finance to the economy constitutes
a major setback to its development. As a result, it
is necessary to evaluate the Nigerian capital market.
OF THE STUDY
The broad objective of this study is to examine the
activities and performance of Nigerian capital market.
The specific objectives of the study are as follows:
1. To evaluate the performance of the capital market
in relation to the economic growth in Nigeria;
2. To examine the operations of the Nigerian capital
3. To examine the rate at which new stocks are issued
on the capital market.
QUESTIONS AND HYPOTHESIS
This research shall be guided by the following research
1. How does the capital market impact on the economic
growth and development process in Nigeria?
2. What is the trend of trading activities on the Capital
3. What is rate at which new stocks are issued on the
Nigerian capital market?
The hypothesis that would be tested in the course of
this research is stated below as:
H0: That the capital market does not stimulate significantly
the economic growth of Nigeria.
H1: That the capital market stimulate significantly
the economic growth of Nigeria.
OF DATA AND BRIEF METHODOLOGY
The data for this study would be obtained mainly from
secondary sources, particularly from Central Bank of
Nigeria (CBN) publications and that of the Federal Office
of Statistics and relevant journals, textbooks and financial
newspapers. The data to be collected include: Gross
Domestic Product, market capitalisation, and All-Share
The research work will make use of the econometric procedure
in estimating the relationship between capital market
operations and Nigerian economic growth. The Ordinary
Least Square (OLS) technique will be employed in obtaining
the numerical estimates of the coefficients in the model
formulated below. The OLS method is chosen because it
possesses some optimal properties; its computational
procedure is fairly simple and it is also an essential
component of most other estimation techniques. The estimation
will be based on quarterly data from first quarter of
2010 through first quarter of 2016.
OF THE STUDY
The economy is a large component with lot of diverse
and sometimes complex parts; this research work will
only look at a particular part of the economy (the financial
sector). This work will not cover all the facets that
make up the financial sector, but shall focus only on
the capital market and its activities as it impacts
on the Nigerian economic growth. The empirical investigation
of the impact of the capital market on the economic
growth in Nigeria shall be restricted to the period
between 2010Q1 and 2016Q1. This restriction is unavoidable
because of the rebasing of economic data from 1990 to
2010 and, non-availability of some important data.
OF THE STUDY
The study will explore the impact or effectiveness of
capital market instruments on Nigerian economic growth.
Though the scope of study will be limited to the capital
market, it is hoped that the exploration of this market
will provide a broad view of the operations of the capital
market. It will contribute to existing literature on
the subject matter by investigating empirically the
role, which the capital market plays in the economic
growth and development of the country. The main importance
of this study is that it will provide policy recommendations
to policy-makers on ways to improve operations and activities
of the capital market.
OF THE STUDY
The study shall commences by providing a background
of the subject matter justifying the need for the study
in chapter one. Chapter two shall present related literature
concerning the role of capital market in economic growth
and development. The chapter shall also present the
theoretical framework for the study. The research methodology
shall then be outlined in chapter three while the chapter
four focuses on the data presentation and analysis.
Concluding comments in chapter five shall reflect on
the summary, conclusion and recommendations.
Adekunle, O. A.; Alalade, Y.S.A.; Okulenu, S. A. (2016)
“Macro-Economic Variables and Its Impact on Nigerian
Capital Market Growth”. International Journal
of Economics and Business Management. Vol. 2, no.
2, pp. 22-37.
Adeusi, S. O.; Sulaiman, L. A. and Azeez, B. A. (2013)
“Impact of Capital Market Development on the Nigerian
Economy: A Post-SAP Analysis”. Journal of
Economics and Behavioral Studies. Vol. 5, no. 1,
Anyanwu, J. C. (1996) Monetary Economics: Theory,
Policy and Institutions. Lagos: Hybrid publishers
Alile, H. I. and Anao, R. A. (1986) The Nigerian
Stock Market in Operation. Lagos: Jeromelaiho and
Demirgüç-Kunt, A. and Levine, R. (1996)
“Stock Market, Corporate Finance and Economic
Growth: An Overview”. The World Bank Review.
Vol. 10, no. 2, pp. 223-239.
Donwa, P. and Odia, J. (2010) “An Empirical Analysis
of the Impact of the Nigerian Capital Market on Her
Socio-economic Development”. Journal of Social
Sciences. Vol. 24, no. 2, pp. 135-142.
Kaserer, C. and Rapp, M. S. (2014) “Capital Markets
and Economic Growth: Long-Term Trends and Policy Challenges”.
The Alternative Investment Management Association
Research Report. March, pp. 1-88.
Liliana, R. S. (2014) “Towards Strong and Stable
Capital Markets in Emerging Market Economies”.
Center for Global Development (CGD) Policy Paper.
No. 42, pp. 1-8.
Ngerebo-A, T. A. and Torbira, L. L. (2014) “The
Role of Capital Market Operations in Capital Formation”.
Journal of Finance and Investment Analysis.
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Odetayo, T. A. and Sajuyigbe, A. S. (2012) “Impact
of Nigerian Capital Market on Economic Growth and Development”.
International Journal of Arts and Commerce.
Vol. 1, no. 5, pp. 1-8.
Okodua, H. and Ewetan, O. O. (2013) “Stock Market
Performance and Sustainable Economic Growth in Nigeria:
A Bounds Testing Co-integration Approach”. Journal
of Sustainable Development. Vol. 6, no. 8, pp.
Okoye, V. O. and Nwisienyi, K. J. (2013) “The
capital market contributions towards economic growth
and development; the Nigerian experience”. Global
Advanced Research Journal of Management and Business
Studies. Vol. 2, no. 2, pp. 120-125.
Osamwonyi, I. O. and Kasimu, A. (2013) “Stock
Market and Economic Growth in Ghana, Kenya and Nigeria”.
International Journal of Financial Research.
Vol. 4, no. 2, pp. 83-98.
Owolabi, A. and Ajayi, N. O. (2013) “Econometrics
Analysis of Impact of Capital Market on Economic Growth
in Nigeria (1971-2010)”. Asian Economic and
Financial Review. Vol. 3, no. 1, pp. 99-110.
Shallu (2014) “Indian capital market and impact
of SEBI”. Tactful Management Research Journal.
Vol. 2, Iss. 4, pp. 1-10.
Yadirichukwu, E. and Chigbu, E. E. (2014) “The
impact of capital market on economic growth: the Nigerian
Perspective”. International Journal of Development
and Sustainability. Vol. 3, no. 4, pp. 838-864.
Regression Data and Results are included
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