Impact of Capital Market Components on Economic Growth in Nigeria: An ARDL Approach

Abstract

The study investigated the impact of capital market components on economic growth in Nigeria between 1981 and 2020. The data used for this study were sourced from CBN statistical bulletin, and World Bank development indicators. In order to avoid spurious regression effects, pre-estimation tests were performed on each of the variables using the Augmented Dickey Fuller (ADF) unit root test; while the empirical analysis was carried using the Autoregressive distributed lag (ARDL) error correction model method. The findings from the study showed that government securities have a significant impact on economic growth in Nigeria. The implication of this finding is that huge government bonds floated has contributed positively and significantly to the volume of goods and services traded within the economy and as such enhanced economic growth. The study also showed that corporate bond has a significant impact on economic growth in Nigeria. The findings from the study showed that equities have a significant impact on economic growth in Nigeria. The implication of this is that as new issues are raised and floated in the market, this in turn increases the number of shares traded and economic growth equally expands as well as impacting on the GDP. Based on these findings, the study recommends that there is the need for government to increase the amount of securities they issue in the market as its increase has positively and significantly improve the overall economic growth of the country. The volume of corporate bond transaction needs to be boosted by NSE through the introduction of more derivatives, convertibles, futures and options in the markets in order to be internationally competitive. To increase the number of listed companies there is need to ensure stable macroeconomic environment, to encourage foreign multinational companies or their subsidiaries to be listed on the Nigerian stock exchange and also to improve the trading system in order to increase the ease with which investors can purchase and sell shares.