Does Capital Market Development Spur Economic Growth?: A Look At Africa’s Largest Economy

Abstract

Capital market enhances economic growth through formation and allocation of long-term capital. It avails listed companies ample platform for long-term finances needed for expansion and increased sustainable output capacities. Hence, it is sine quo none for overall socio-economic development. This paper examined capital market-economic growth nexus in Nigeria, Africa’s largest economy, during the 1985-2015 periods. Analysis was anchored on relevant multiple regression model whose coefficients were estimated via the ordinary least squares (OLS) techniques. The paper sourced data from relevant publications of the Securities and Exchange Commission (SEC) and Central Bank of Nigeria (CBN). Economic growth variable was gross domestic product (GDP), while capital market indices were market capitalisation (MCAP), Value of transactions (VTS) and All-Shares Index (ASI). Results showed that in specifics, market indices had heterogeneous effects on growth of the economy but on aggregate, capital market development significantly induced growth of the economy during the study period. Thus, the paper concluded that capital market development spurred economic growth, and recommended sustained development of the capital market