The Imperative of Stock Market on Economic Growth in Nigeria: “The Endogenous Growth Model”

Abstract

The study examined the imperative of stock market on economic performance in Nigeria. The objective of the study were to examine the relationship between total value traded in the stock market, market capitalization, trade openness, inflation rate and economic growth in Nigeria. The study was basically time series data based relating to market capitalization, total value traded ratio, real GDP per capita, inflation rate and trade openness of the economy. The data was sourced from Nigerian stock exchange annual reports, CBN statistical bulletine, the Nigerian stock exchange fact book, World Bank database publication and publication from relevant plurals and articles. The study adopted the Ordinary Least Squares (OLS) techniques of multiple regression and co integration test. The E-view 7.1 econometric software was used to run the model. The coefficient of ECM appeared with the right sign and statistically significant at the 5% level. Therefore, it corrects any deviation from long-run equilibrium. Durbin Watson value of 2.3 which is approximately 2.0 suggests a lesser level of autocorrelation. The overall fit is satisfactory with an R-squared of 0.790. The F-statistic of 6.51706 is significant at the 5% level. Moreover, the lag one and two forms of the independent variables (Mcap, TVT and TOP) were positively signed. While the lag one and two forms of the independent variable (INF) are negatively signed. All these conform to apriority expectation. Based on the above findings, the study recommends that the government should implement the reforms already in place as this will boost the activities of the market.