IMPACT OF FINANCIAL MARKET ON ECONOMIC GROWTH IN NIGERIA
Ahmed Mohammed Salisu, Eggon Ahmed Henry, PhD and Ajidani S. Moses
Volume 11 Issue 5
Abstract
The study examined the impact of financial market on economic growth in Nigeria for the period of 1985-2023. The study adopts ex-post factor design in order to answer the research questions. The study utilizes secondary sources of data extracted from the central bank of Nigeria annual statistics bulletin, and world development indicator (WDI) database 2023. The study undertakes unit root test employing augmented Dickey-Fuller method to determine whether the variables are stationary or not and the result shows that the variables are all stationary I (1). The study employed co-integration test and the results shows that there is evidence of long run relationship among variables, the study employed the vector autoregression (VAR) model for estimation. The findings showed that market capitalization (MC) has positive and statistically significant impact on economic growth in Nigeria during the period under study, similarly, the findings showed that all share index (ASI) has positive and statistically significant impact on economic growth in Nigeria during the period under review. Similarly, the findings showed that total new shares issued (TNI) has positive and statistically insignificant impact on economic growth in Nigeria during the period under review. Similarly, the findings showed that bank credit to private sector (BCPS) has positive and statistically significant impact on economic growth in Nigeria during the period under review. The findings shows that commercial paper (CP) has positive and insignificant impact on economic growth in Nigeria during the period under review. The study also revealed that treasury bills (TBs) has negative and statistically insignificant impact on economic growth in Nigeria during the period under review. Therefore, the study found that financial market generally has positive impact on economic growth in Nigeria during the period of the study. The study recommends the market capitalization should be improved by encouraging more foreign investors to participate in the market, maintain state of the art technology like automated trading and settlement practice, electronic fund clearance and eliminate physical transfer of shares. The policy makers and stakeholders in the industry should encourage the use of commercial paper by the corporate entities to bridge short term financing needs. The study further recommends that financial reform and credit policy of the apex bank should be geared toward improving the credit to private sector by making more loanable funds available to the domestic investors through soft loans bearing attractive interest rate and lessen the stringent collateral security requirements on the private sector credits. Keywords: Financial Market, Economic Growth, VAR, Market Capitalization, Share Index, Commercial Papers and Bank Credit.
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