Capital Market Development and Economic Transformation in Nigeria

The study determined the nature of the relationship capital market development and economic growth in Nigeria during 1990 – 2024. The data for the period under consideration were sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin for annual time-series analysis; the economic growth indicator used was real GDP growth while total market capitalization was used as the measure of the capital market development. Control variables included money supply, private sector credit and inflation. The Autoregressive Distributed Lag (ARDL) method was used to analyse the short and long run relationships between the variables. A long run relationship was confirmed with the bounds test. In the long run, the impact of market capitalization and money supply are positive for economic growth while the impact of private sector credit and inflation are negative. In the short run, the capitalization of a market has positive and significant impact on both the contemporaneous and lagged changes in the economic growth, while the money supply has negative and significant impact on the economic growth. Inflation has a negative contemporaneous effect but positive and significant effects at its first and second lags; private sector credit has no significant short-run effect. The disequilibration correction coefficient is negative and significant, which means there is a high rate of correction of about 91.8% or more of the disequilibrium in one year. The study found that capital market development has relevance to Nigeria’s economic development but its impact is moderated by the general state of the monetary and macro economic conditions. It suggests policies to increase market depth, build investor confidence, increase long-term capital inflows and to optimize monetary and credit management to boost the contribution of the capital market to economic growth.