Capital Market and Economic Growth: Lessons from Nigeria

This study examines the effect of Capital market on Economic Growth in Nigeria from 1988 2023. Employing annual time series data, we utilize Augmented Dickey Fuller (ADF) and Phillips-Perron tests for unit roots, and the Autoregressive Distributed Lag (ARDL) model for data analysis. Diagnostic tests, including Breusch-Godfrey Serial Correlation LM Test, ARCH heteroskedasticity test, CUSUM test, CUSUM of squares test, and histogram normality test were conducted to assess reliability and robustness of the model. The ARDL model estimates show an insignificant and negative relationship between Market capitalization (MCP) and Gross domestic product (GDP) while All Share Index (ASI) exhibits a negative and statistically significant long-run effect on GDP. Total listed equity value (EQT) had a positive but statistically insignificant effect on GDP whereas Value of transactions (VTR) had a positive and significant effect on the GDP. In conclusion the Nigerian capital market significantly influences economic growth mainly through liquidity (VTR), while MCP, ASI, and EQT have limited long-run effects. Therefore, the study recommends that the Securities and Exchange Commission should strengthen regulatory oversight and Improve market efficiency to reduce speculative trading and ensure that growth in market size translates into productive investment.