Abstract:
This work analyzed the dynamics of stock market development and economic growth in Nigeria from 1984 – 2017. The specific objectives were to: determine the impact of stock market size on Nigeria’s economic growth; determine the impact of stock market liquidity on Nigeria’s economic growth; ascertain whether there was existence of long – run relationship between stock market development and Nigeria’s economic growth; determine the existence and level of volatility clustering in Nigerian stock market, and determine the degree and direction of causality between stock market development and Nigeria’s economic growth. Variables such as market capitalization, number of listed companies, total value traded, turnover ratio, all share index, banking development, inflation rate, trade openness and real gross domestic product were used in the investigation. Ex-post-facto research design was used for the study which was guided by the five research objectives and hypotheses. The study’s population was the values of stock market indicators from 1961 – 2017, excepting all share index which was 1984 – 2017; also was the values of macroeconomic variables from 1960 – 2017. Time series data covering the period of 1984 – 2017 were used as the sample size. Autoregressive Distributed Lag model (ARDLM), Exponential Generalized Autoregressive Conditional Heteroscedasticity (1.1) (EGARCH) model and Toda Yamamoto causality test, along with their preliminary and diagnostic tests were employed to test the hypotheses all of which were conducted at 0.05 level of significance. For purpose of accuracy in results, E-views statistical package was employed. Among the major findings of the study were that stock market size had positive and significant impact on economic growth. The stock market liquidity had positive but non-significant relationship with the economic growth. There was volatility clustering with explosive persistence and negative asymmetric parameter in the market. The study concluded that the Nigeria stock market is growth inducing; but still relatively underdeveloped and was plagued with volatility, for market indices to exert significant impact on the growth of the economy. Among other recommendations, Security and Exchange Commission should through moral suasion and/or government legislation bring private companies that have met certain financial thresholds to convert to public companies. This is part of the strategy used to get MTN listed on the Exchange, and AIRTEL is also being listed. Other telecommunication companies should be approached. This will increase the number of listed companies and go a long way in broadening and deepening the base of the market to promote growth.
