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STOCK MARKET DEVELOPMENT AND ECONOMIC GROWTH IN NIGERIA
ABSTRACT
Stock markets have been theorized to be an important arbiter of growth. They contribute to growth mostly when they are liquid and large in size. Liquid equity market makes investment less risky and more attractive thereby increasing investors’ confidence. The beneficial roles of stock market liquidity and size to economic growth has been a subject of controversy worldwide. To this end therefore, this study analyze the impact of the stock market development (as measured by size and liquidity) on economic growth in Nigeria using the Ordinary Least Squares (OLS) and the Generalized Least Squares (GLS) on time series data spanning from 1980 to 2015. The study found that stock market contributes to growth via liquidity only. The implication of the liquidity advantage of the Nigerian stock market is that the market can ease savings mobilization and thus further accelerate growth through raising capital and mobilizing them for productive usage. Liquidity market can assist in accomplishing government in achieving its monetary policy and thus further contribute to economic growth. In order to increase the size impact of stock market, and reducing the cost of mobilizing savings in the economy and facilitating productive investments thus contributing to economic growth, the study recommends sound macroeconomic policies, conducive legal environment, attractive tax structures, good political climate and an urgent need for the re-positioning of the stock exchanges in Nigeria.
Keywords: Stock Market Development, Economic Growth, Efficient Markets, Investments,