Stock Market Liquidity As A Catalyst For Economic Growth In Nigeria

This study examined stock market liquidity and economic growth in Nigeria (1981-2019). Gross Domestic Product was used as the dependent variable while the explanatory variables where market capitalization. The research adopted the Ordinary Least Square (OLS) regression method to estimate the model of the study. The result from the estimated model above, shows that there is a positive relationship between market capitalization and the Gross Domestic Product of Nigeria (0.707759) though statistically not significant at 5% level of significance. A unit increase in the market capitalization results in an increase in Gross Domestic Product by 70%. The implication of this is that the economy responds favorably to measures taken to increase the total market value of companies quoted on the Nigerian stock exchange. The market capitalization shows the level of capitalization on the stock market and this is the investors’ perception of the market, it is affected among others by trading volume and the total value of amount traded on the stock market. There has been a rapid rise in the amount of stock market capitalization over the years and this indicates that the populace has grown interests in the securities listed on the stock market, so more securities were sold which means more profit for Nigerian stock exchange, firms that sold these securities and for Nigeria as a country and this led to the positive effect on the GDP of Nigeria. Also, the overall market size is positively correlated with the ability to mobilize capital and diversify risk on economy-wide basis