Long and Short Run Relationship between Stock Market Development and Economic Growth in Nigeria
Keywords:
Stock Market; Causality; Nigeria; Economic growth
Abstract
We examined the long and short run association subsisting between stock market development
(market capitalisation, value of transactions, number of deal and all share index), and Nigerian economic
growth (RGDP) with quarterly data from 1986 to 2017. The Autoregressive Distributed Lag (ARDL) model is
applied for the purpose of estimation. The ARDL bound test result revealed that all the indicators of market
development exert positive effect on the RGDP in the short run. Further, all the indicators except number of
deals, have direct and significant relationship with economic growth. Moreover, we find that market
development causes economic growth. Consequently, we recommend a need for the implementation of
policies and procedures capable of enhancing investors’ confidence and boosting market because of their
perceived multiplier impacts on economic growth. Effort should also be focused on the enhancement of stock
market size which in turn will provide the needed fund for investment and thus resulting in rise in the RGDP.
Downloads
Download data is not yet available.
References
Abbas I. O., Pei Y. X. & Rui, Z. (2016). Impact of Stock Market on Economic Growth Evidence: Dar-es Salaam
Stock Exchange –Tanzania. J Fin Acc, 4, 321-327.
Adamu, J. A. & Sanni, I. (2005). Stock Market Development and Nigerian Economic Growth. Journal of
Economic and Allied Fields, 2(2), 116-132.
Adeusi, S. O., Suliaman, L. A. & Azeez, B. A. (2013). Impact of Capital Market Development on the Nigerian
Economy: A Post–SAP Analysis. Journal of Economics and Behavioural Studies, 5(1), 1-7.
Agu, B. O. (2018). Economic Growth and Capital Market Development in Nigeria an Appraisal. Journal of
Business Management and Economic Research, 2(4), 27?38.
Al-Faki, M. (2006). The Nigerian Capital Market and Socio-economic Development: A Paper Presented at the
4th distinguished Faculty of Social Science, Public Lectures, University of Benin, Nigeria.
Almahmoud, A. I. (2014). Country Risk Ratings and Stock Market Movements: Evidence from Emerging
Economy. International Journal of Economics and Finance, 6(10), 88-96.
Anne, C. M. & Kevin, O. O. (2013). Financial Market Structure and Economic Growth: Evidence from Nigeria
Data. Asian Economic and Financial Review, 3(1), 75-98.
Araoye, F. E., Ajayi, E. O. & Aruwaji, A. M. (2018). The Impact of Stock Market Development on Economic
Growth in Nigeria. Journal of Business and African Economy, 4(1), 1-15.
Arunma, O. (2010). Testimony on the Global Financial Crisis and Financial Reform in Nigeria: A Capital
Market Perspective: A Paper Presented before the United States House of Representatives Committee
on Financial Services Sub-Committee on International Monetary Policy and trade, Tuesday,
November 16. Available online http://www.e3journals.org.
Azeez, B. A. & Obalade, A. A. (2019). Macroeconomic Determinants of Stock Market Development in Nigeria:
(1981-2017). ACTA UNIVERSITATIS DANUBIUS, 15(1), 203-216.
Bouzid, A. (2012). McKinnon’s Complementarity Hypothesis: Empirical evidence for the Arab Maghrebean
Countries. Romanian Economic Journal, 15(44), 23-36.
Cameron, Rondo, et al. (1967). Banking in the Early Stages of Industrialization. Oxford University Press.
Dike, C. (2016). Stock Market Efficiency Promotes Economic Development: Empirical Evidence from Africa.
International Journal of Economics and Financial Issues, 6(3), 1287-1298
Ewah, S. O., Esang, A. E. & Bassey, J. U. (2009). Appraisal of Capital Market Efficiency on Economic Growth in
Nigeria. International Journal of Business and management, 4(12), 219-228
Ezeoha, A., Ebele, O. & Okereke, O. (2009). Stock Market Development and Private Investment Growth in
Nigeria. Journal of Sustainable Development Africa, 11, 20-35.
Fama, E. F. (2005). Random Walk in Stock Market Prices. Journal of Financial Analysis, 16(3), 21-27.
Isu, O. H. & Okpara, C. (2013). Does Financial Deepening follow Supply Leading or Demand Following
Hypothesis? A look at Nigerian Evidence. Journal of Financial Accounting, 6(1), 26-34.
Japelli, T. & Pagano, M. (1994). Saving, Growth and Liquidity Constraints. Quarterly Journal of
Economics, 109(1), 83-109.
Jhingan, M. L. (2004). The Economic of Development and Planning. New Delhi, Vrinda Publications Limited.
Josiah, M., Samson, A. A. & Akpeti, O. E. (2012). Capital Market as a Veritable Source of Development in Nigeria
Economy. Journal of Accounting and Taxation, 4(1), 7-18.
Kolapo, F. T. & Adaramola, A. O. (2012).The Impact of Capital Market on Economic Growth. Int. J. Dev Societies,
1, 11-19.
Mbat, D. O. (2001). Financial Management. Domes Associates Publishers. Uyo, Nigeria First Edition.
McKinnon, R. (1973). Money and Capital in Economic Development. Washington, D.C.: Brookings Institution.
Njiforti, P. (2015). Impact of the 2007/2008 Global Financial Crisis on the Stock Market in Nigeria. CBN
Journal of Applied Statistics, 6(1), 49-68.
Obalade, A. A. & Obisesan, O. G. (2015). Relative Potency of Internal and External Sources of Financing
Nigerian Economic Growth: 1983-2012. IOSR Journal of Economics and Finance, 6(3), 39-47.
Ogochukwu & Raifu (2017). Stock Market Development and Economic Growth: Evidence from Africa. EuroAsian Journal of Economics and Finance, 5(1), 23-22
Ogunleye, E. O. & Adeyemi, P. A. (2015). The Impact of Stock Market Development on Economic Growth in
Nigeria. Journal of Economics and Sustainable Development, 6 (23), 21-28.
Oke, M. O. (2013). Capital Market Operation and Economic Growth in Nigeria (1985-2011). International
Journal of Business and Social Studies, 4(7), 166-172.
Okonkwo, I. V., Ananwude, A. & Echekoba, F. N. (2015). Nigeria Stock Market Development and Economic
Growth: A Time Series Analysis (1993 – 2013). Sch. J. Econ Bus Manag, 2(3), 280-293.
Okoye, L. U., Modebe, N. J., Taiwo, J. N. & Okorie, U. E. (2016). Impact of Capital Market Development on the
Growth of the Nigerian Economy. Research Journal of Financial Sustainability Reporting, 1(1) 24-32.
Olokoyo, F. O. & Ogunnaike, O. O. (2011). An Empirical Analysis of the effect of Stock Market Crisis on
Economic Growth: The Nigerian Case. ACTA Universitatis Danubius, 7(4), 172-186.
Oluwatosin, E. O., Adekanye, T. & Yusuf S. A. (2013). Empirical Analysis of the Impact of Capital Market
Efficiency on Economic Growth and Development in Nigeria. International Journal of Academic
Research in Economics and Management Sciences, 2(6), 44-53.
Osakwe, C. I. & Ananwunde, A. (2017). Stock Market Development and Economic Growth: A Comparative
Evidence from two Emerging Economies in Africa – Nigeria and South Africa. Archives of Current
Research International, 11(1), 1-15.
Ananwude, A. C. & Osakwe, C. I. (2017). Stock Market Development and Economic Growth in Nigeria: A
Camaraderie Reconnaissance. Research Journal of Economics, 1(3), 1-6.
Osaseri, G. & Osamwonyi, I. O. (2019). Impact of Stock Market Development on Economic Growth in BRICS.
International Journal of Financial Research, 10(1), 23-30.
Osundina, A. J. & Osundina, K. C. (2016). Stock Market Development and Welfare in Nigeria: A VECM
Approach. Research Journal of Finance and Accounting, 7(16), 145-150.
Ozurumba, B. A. & Chigbu, E. E. (2013). An econometric analysis of capital market performance and economic
growth of Nigeria. Interdisciplinary Journal of Contemporary Research in Business, 4(10), 165-170.
Patrick, H. T. (1966). Financial Development and Economic Growth in Underdeveloped Countries. Economic
Development and Cultural Change, 14, 174-189.
Pesaran, M. H., Shin, Y. & Smith, R. (2001). Bound Testing Approaches to the Analysis Level Relationships.
Journal of Applied Econometrics, 16,289-326.
Pesaran, M. & Pesaran, B. (1999). An Autoregressive Distributed Lag modelling approach to co-integration
Analysis. In S. Storm, (Ed) Econometrics and Economic Theory in the 20th Century: The Ragnar Frish
Centennial Symposium, Cambridge University, Press, Cambridge.
Raymond, N. (2013). Relationship between Stock Market Development and Economic Growth in Kenya.
School of Business, University of Nairobi.
Rayyanu, A. K. (2015). Financial Liberalisation and Economic Growth in Nigeria. An Empirical Analysis. IOSR
Journal of Economics and Finance, 6(3), 15-24
Sanusi, S. (2010). Global Financial meltdown and the Reforms in the Nigerian Banking Sector. Paper
Retrieved from http://www.cenbank.org/out /speechless/2010/govATBU%20convocation
%20lecture.pdf.
Sanusi, S. L. (2012). Banking reform in Nigeria and its impact on the economy. Abuja: Central
Bank of Nigeria.
Taiwo, J. N., Alaka, A. & Afieroho, E. (2016). Capital Market and Economic Growth in Nigeria. Account and
Financial Management Journal, 1(8), 497-525.
Tari, M. K. & Oliver, E. O. (2017). Financial Deepening and Economic Growth Nexus in Nigeria: Supply-Leading
or Demand- Following? Economics, 5(4), 1-18.
Tsaurai, K. (2016). The Nexus between Stock Market Development and economic growth. Corporate
Ownership & Control, 14 (1), 276-277.
Veronika, K. & Petr R. (2016). Stock Market Development and Economic Growth: Evidence from the European
Union. Acta Universitatis Agriculture et Silviculturae Mendelianae Brunensis, 64(6), 1927-1936.
Stock Exchange –Tanzania. J Fin Acc, 4, 321-327.
Adamu, J. A. & Sanni, I. (2005). Stock Market Development and Nigerian Economic Growth. Journal of
Economic and Allied Fields, 2(2), 116-132.
Adeusi, S. O., Suliaman, L. A. & Azeez, B. A. (2013). Impact of Capital Market Development on the Nigerian
Economy: A Post–SAP Analysis. Journal of Economics and Behavioural Studies, 5(1), 1-7.
Agu, B. O. (2018). Economic Growth and Capital Market Development in Nigeria an Appraisal. Journal of
Business Management and Economic Research, 2(4), 27?38.
Al-Faki, M. (2006). The Nigerian Capital Market and Socio-economic Development: A Paper Presented at the
4th distinguished Faculty of Social Science, Public Lectures, University of Benin, Nigeria.
Almahmoud, A. I. (2014). Country Risk Ratings and Stock Market Movements: Evidence from Emerging
Economy. International Journal of Economics and Finance, 6(10), 88-96.
Anne, C. M. & Kevin, O. O. (2013). Financial Market Structure and Economic Growth: Evidence from Nigeria
Data. Asian Economic and Financial Review, 3(1), 75-98.
Araoye, F. E., Ajayi, E. O. & Aruwaji, A. M. (2018). The Impact of Stock Market Development on Economic
Growth in Nigeria. Journal of Business and African Economy, 4(1), 1-15.
Arunma, O. (2010). Testimony on the Global Financial Crisis and Financial Reform in Nigeria: A Capital
Market Perspective: A Paper Presented before the United States House of Representatives Committee
on Financial Services Sub-Committee on International Monetary Policy and trade, Tuesday,
November 16. Available online http://www.e3journals.org.
Azeez, B. A. & Obalade, A. A. (2019). Macroeconomic Determinants of Stock Market Development in Nigeria:
(1981-2017). ACTA UNIVERSITATIS DANUBIUS, 15(1), 203-216.
Bouzid, A. (2012). McKinnon’s Complementarity Hypothesis: Empirical evidence for the Arab Maghrebean
Countries. Romanian Economic Journal, 15(44), 23-36.
Cameron, Rondo, et al. (1967). Banking in the Early Stages of Industrialization. Oxford University Press.
Dike, C. (2016). Stock Market Efficiency Promotes Economic Development: Empirical Evidence from Africa.
International Journal of Economics and Financial Issues, 6(3), 1287-1298
Ewah, S. O., Esang, A. E. & Bassey, J. U. (2009). Appraisal of Capital Market Efficiency on Economic Growth in
Nigeria. International Journal of Business and management, 4(12), 219-228
Ezeoha, A., Ebele, O. & Okereke, O. (2009). Stock Market Development and Private Investment Growth in
Nigeria. Journal of Sustainable Development Africa, 11, 20-35.
Fama, E. F. (2005). Random Walk in Stock Market Prices. Journal of Financial Analysis, 16(3), 21-27.
Isu, O. H. & Okpara, C. (2013). Does Financial Deepening follow Supply Leading or Demand Following
Hypothesis? A look at Nigerian Evidence. Journal of Financial Accounting, 6(1), 26-34.
Japelli, T. & Pagano, M. (1994). Saving, Growth and Liquidity Constraints. Quarterly Journal of
Economics, 109(1), 83-109.
Jhingan, M. L. (2004). The Economic of Development and Planning. New Delhi, Vrinda Publications Limited.
Josiah, M., Samson, A. A. & Akpeti, O. E. (2012). Capital Market as a Veritable Source of Development in Nigeria
Economy. Journal of Accounting and Taxation, 4(1), 7-18.
Kolapo, F. T. & Adaramola, A. O. (2012).The Impact of Capital Market on Economic Growth. Int. J. Dev Societies,
1, 11-19.
Mbat, D. O. (2001). Financial Management. Domes Associates Publishers. Uyo, Nigeria First Edition.
McKinnon, R. (1973). Money and Capital in Economic Development. Washington, D.C.: Brookings Institution.
Njiforti, P. (2015). Impact of the 2007/2008 Global Financial Crisis on the Stock Market in Nigeria. CBN
Journal of Applied Statistics, 6(1), 49-68.
Obalade, A. A. & Obisesan, O. G. (2015). Relative Potency of Internal and External Sources of Financing
Nigerian Economic Growth: 1983-2012. IOSR Journal of Economics and Finance, 6(3), 39-47.
Ogochukwu & Raifu (2017). Stock Market Development and Economic Growth: Evidence from Africa. EuroAsian Journal of Economics and Finance, 5(1), 23-22
Ogunleye, E. O. & Adeyemi, P. A. (2015). The Impact of Stock Market Development on Economic Growth in
Nigeria. Journal of Economics and Sustainable Development, 6 (23), 21-28.
Oke, M. O. (2013). Capital Market Operation and Economic Growth in Nigeria (1985-2011). International
Journal of Business and Social Studies, 4(7), 166-172.
Okonkwo, I. V., Ananwude, A. & Echekoba, F. N. (2015). Nigeria Stock Market Development and Economic
Growth: A Time Series Analysis (1993 – 2013). Sch. J. Econ Bus Manag, 2(3), 280-293.
Okoye, L. U., Modebe, N. J., Taiwo, J. N. & Okorie, U. E. (2016). Impact of Capital Market Development on the
Growth of the Nigerian Economy. Research Journal of Financial Sustainability Reporting, 1(1) 24-32.
Olokoyo, F. O. & Ogunnaike, O. O. (2011). An Empirical Analysis of the effect of Stock Market Crisis on
Economic Growth: The Nigerian Case. ACTA Universitatis Danubius, 7(4), 172-186.
Oluwatosin, E. O., Adekanye, T. & Yusuf S. A. (2013). Empirical Analysis of the Impact of Capital Market
Efficiency on Economic Growth and Development in Nigeria. International Journal of Academic
Research in Economics and Management Sciences, 2(6), 44-53.
Osakwe, C. I. & Ananwunde, A. (2017). Stock Market Development and Economic Growth: A Comparative
Evidence from two Emerging Economies in Africa – Nigeria and South Africa. Archives of Current
Research International, 11(1), 1-15.
Ananwude, A. C. & Osakwe, C. I. (2017). Stock Market Development and Economic Growth in Nigeria: A
Camaraderie Reconnaissance. Research Journal of Economics, 1(3), 1-6.
Osaseri, G. & Osamwonyi, I. O. (2019). Impact of Stock Market Development on Economic Growth in BRICS.
International Journal of Financial Research, 10(1), 23-30.
Osundina, A. J. & Osundina, K. C. (2016). Stock Market Development and Welfare in Nigeria: A VECM
Approach. Research Journal of Finance and Accounting, 7(16), 145-150.
Ozurumba, B. A. & Chigbu, E. E. (2013). An econometric analysis of capital market performance and economic
growth of Nigeria. Interdisciplinary Journal of Contemporary Research in Business, 4(10), 165-170.
Patrick, H. T. (1966). Financial Development and Economic Growth in Underdeveloped Countries. Economic
Development and Cultural Change, 14, 174-189.
Pesaran, M. H., Shin, Y. & Smith, R. (2001). Bound Testing Approaches to the Analysis Level Relationships.
Journal of Applied Econometrics, 16,289-326.
Pesaran, M. & Pesaran, B. (1999). An Autoregressive Distributed Lag modelling approach to co-integration
Analysis. In S. Storm, (Ed) Econometrics and Economic Theory in the 20th Century: The Ragnar Frish
Centennial Symposium, Cambridge University, Press, Cambridge.
Raymond, N. (2013). Relationship between Stock Market Development and Economic Growth in Kenya.
School of Business, University of Nairobi.
Rayyanu, A. K. (2015). Financial Liberalisation and Economic Growth in Nigeria. An Empirical Analysis. IOSR
Journal of Economics and Finance, 6(3), 15-24
Sanusi, S. (2010). Global Financial meltdown and the Reforms in the Nigerian Banking Sector. Paper
Retrieved from http://www.cenbank.org/out /speechless/2010/govATBU%20convocation
%20lecture.pdf.
Sanusi, S. L. (2012). Banking reform in Nigeria and its impact on the economy. Abuja: Central
Bank of Nigeria.
Taiwo, J. N., Alaka, A. & Afieroho, E. (2016). Capital Market and Economic Growth in Nigeria. Account and
Financial Management Journal, 1(8), 497-525.
Tari, M. K. & Oliver, E. O. (2017). Financial Deepening and Economic Growth Nexus in Nigeria: Supply-Leading
or Demand- Following? Economics, 5(4), 1-18.
Tsaurai, K. (2016). The Nexus between Stock Market Development and economic growth. Corporate
Ownership & Control, 14 (1), 276-277.
Veronika, K. & Petr R. (2016). Stock Market Development and Economic Growth: Evidence from the European
Union. Acta Universitatis Agriculture et Silviculturae Mendelianae Brunensis, 64(6), 1927-1936.
Published
2019-12-09
How to Cite
Anthony Olugbenga Adaramola, & Modupe F. Popoola. (2019). Long and Short Run Relationship between Stock Market Development and Economic Growth in Nigeria. Journal of Economics and Behavioral Studies, 11(5(J), 45-53. https://doi.org/10.22610/jebs.v11i5(J).2965
Issue
Section
Research Paper
Copyright (c) 2019 Anthony Olugbenga Adaramola, Modupe F. Popoola
This work is licensed under a Creative Commons Attribution 4.0 International License.
Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of a revised paper in the light of suggestions of the reviewers, editorial team edits and formats manuscripts to bring uniformity and standardization in published material.
This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.
