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The Role Of Stock Market In The Growth Of Nigerian Economy (1980 – 2010)
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1.2 Statement of the Problem
There is abundant evidence that most
Nigerian businesses lack medium and long –term capital. The business
sector has depended mainly on short-term financing such as overdrafts to
finance even long-term investment. 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 1996). Most recent literatures on the Nigeria Capital Market have
recognized the tremendous performance the market has recoded in recent
times. However, the vital role of the capital market in economic growth
and development has not been empirically 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 deficiency of finance to the economy constitutes a major setback to
its development. As a result, it is necessary to evaluate the Nigerian
capital market.
1.3 Research Questions
In the light of the research problems, this study attempts to answer the following:
1. Does stock market have a significant effect on economic growth?
2. Does investment have a significant effect on GDP?
3. What is the causality between stock market and economic growth?
1.4 Objectives of the Study
The
broad objective of this study is to examine the role that the stock
market plays in the growth process of the Nigerian economy.
However, the specific objectives are as follow:
1. To determine the nature of relationship between stock market and economic growth.
2. To examine the determinants of investment in the stock market.
3. To determine the causality between stock market and economic growth.
1.5 Hypotheses of the Study
1. Ho: That the capital market has a negative relationship with economic growth.
2. Ho: portfolio Investment in Nigeria is not a determinant of economic growth.
3. Ho: There is no causal relationship between stock market and economic growths.
1.6 Significance of the Study
The
study will explore the 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.
1.7 Scope 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 facts
that make up the financial sector, but shall focus only on the capital
market and it role as it impacts on the Nigerian economic growth. The
empirical investigation of the role of the capital market on the
economic growth in Nigeria shall be restricted to the period between
1980 and 2010 a period of thirty (30) years.
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ABSRACT - [ Total Page(s): 1 ]This study attempts to investigate the Role of the Stock Market in the Growth of the Nigerian Economy spanning through 1980 – 2010. The broad objective of this work is to ascertain the role of the stock market in output growth in Nigeria using Market Capitalization as a proxy for the stock market taking cognizance of some intervening variables. This was evaluated using OLS Method. It was observed that market capitalization has a significant impact on economic growth as well as the latter ... Continue reading---
