Stock Market Performance and Economic Growth in Nigeria (1985 - 2018)

Abstract

This study examines the relationship between stock market performance and economic growth in Nigeria. The study adopted the ex post facto research design. Secondary data were sourced from Central Bank of Nigeria (CBN) Statistical Bulletins and Securities and Exchange Commission Statistical Bulletin from 1985 to 2018. Cointegration, normality and descriptive statistics tests as well as ordinary least squares regression analyses were conducted. The cointegration test showed that there is a long-run equilibrium relationship between economic growth (GDPr), money supply (M2R), credit to private sector (CPSR), market capitalization ratio (MCR), number of securities listed (NSL) and turnover ratio (TOR) while all share index (ASI) and monetary policy rate (MPR) did not have a long-run equilibrium relationship. The p-values of the ordinary least squares regression test results were used to test the research hypotheses. The findings revealed that there is a significant relationship between market capitalization ratio, total number of listed securities and economic growth rate in Nigeria. Also, there is a significant relationship between turnover ratio and economic growth rate in Nigeria. The finding further revealed that all share index has insignificant influence on economic growth and financial deepening growth rate in Nigeria. Additionally, there is a significant relationship between monetary policy rate and the financial deepening growth in Nigeria. The results also indicated that there is a significant relationship between stock market performance indicators and the financial deepening growth in Nigeria. It was concluded that there is a significant relationship between stock market performance and economic growth in Nigeria. Recommendations were that there is need to improve trading on stocks by encouraging more companies and securities to be listed on the stock exchange for more equity capitalization. The Central Bank of Nigeria should control the level of money supply as well as credit to private sector for more financial deepening in order to galvanize stock market activities.