<abstract xmlns="http://www.w3.org/1999/xhtml">

<bold>Aim/purpose</bold> – The poor investment climate is one of the reasons advanced for the slow pace of growth in Nigeria; evidenced by the absence or inadequate amount of investible funds in the productive sectors. While the money market in Nigeria provides very limited investment options, the underdevelopment and underutilisation of the Nigerian Stock Market constitute a drawback to the investment climate. However, any economy desiring sustainable development requires a long-term source of fund. Therefore, this study ascertains the performance of the stock market and investment growth nexus in Nigeria.
<bold>Design/methodology/approach</bold> – The study is based on the neoclassical growth theory with a slight modification in the wake of Levine’s specification (2003), an augmented investment growth relationship was specified. This study utilises the Autoregressive Distributed Lag (ARDL) in establishing the co-integration relation between stock market development and investment growth. Gross capital formation was used as a proxy for investment growth while the stock market indicators are market capitalisation ratio, total value traded ratio and turnover ratio. The study utilises data covering 1981 to 2018, sourced from the Nigerian Stock Exchange annual reports and diverse publication of the Nigerian Bureau of Statistics.
<bold>Findings</bold> – The market capitalisation ratio had a negative impact on gross capital formation both in the short run and the long run, but its significance is only evident in the short run. The turnover ratio had a negative and significant impact on investment growth. The total value traded ratio exerted a positive and significant impact on gross capital formation both in the short run and the long run. The coefficient of the error correction term was negative and statistically significant.
<bold>Research implications/limitations</bold> – The total value traded ratio enhanced investment growth in Nigeria. Both market capitalisation and turnover ratio dampen investment growth. The Stock Exchange is not efficient and does not possess the amount of liquidity required to finance long term investment need in Nigeria. Emphasis on measures geared towards increasing efficiency and liquidity should be intensified by the government. Meanwhile, the sectorial analysis of the impact of stock exchange movements in Nigeria and the use of other estimation techniques may create room for more robust relationships.
<bold>Originality/value/contribution</bold> – The study directly investigates the capability of the Nigerian stock market in driving investment, both in the short and long run.
</abstract>

Aim/purpose – The poor investment climate is one of the reasons advanced for the slow pace of growth in Nigeria; evidenced by the absence or inadequate amount of investible funds in the productive sectors. While the money market in Nigeria provides very limited investment options, the underdevelopment and underutilisation of the Nigerian Stock Market constitute a drawback to the investment climate. However, any economy desiring sustainable development requires a long-term source of fund. Therefore, this study ascertains the performance of the stock market and investment growth nexus in Nigeria.
Design/methodology/approach – The study is based on the neoclassical growth theory with a slight modification in the wake of Levine’s specification (2003), an augmented investment growth relationship was specified. This study utilises the Autoregressive Distributed Lag (ARDL) in establishing the co-integration relation between stock market development and investment growth. Gross capital formation was used as a proxy for investment growth while the stock market indicators are market capitalisation ratio, total value traded ratio and turnover ratio. The study utilises data covering 1981 to 2018, sourced from the Nigerian Stock Exchange annual reports and diverse publication of the Nigerian Bureau of Statistics.
Findings – The market capitalisation ratio had a negative impact on gross capital formation both in the short run and the long run, but its significance is only evident in the short run. The turnover ratio had a negative and significant impact on investment growth. The total value traded ratio exerted a positive and significant impact on gross capital formation both in the short run and the long run. The coefficient of the error correction term was negative and statistically significant.
Research implications/limitations – The total value traded ratio enhanced investment growth in Nigeria. Both market capitalisation and turnover ratio dampen investment growth. The Stock Exchange is not efficient and does not possess the amount of liquidity required to finance long term investment need in Nigeria. Emphasis on measures geared towards increasing efficiency and liquidity should be intensified by the government. Meanwhile, the sectorial analysis of the impact of stock exchange movements in Nigeria and the use of other estimation techniques may create room for more robust relationships.
Originality/value/contribution – The study directly investigates the capability of the Nigerian stock market in driving investment, both in the short and long run.

Stock market development and investment growth in Nigeria

Journal of Economics and Management

This work is licensed under the Creative Commons Attribution-NonCommercial 4.0 International License.

{"article-title":"Stock market development and investment growth in Nigeria"}

Aim/purpose – The poor investment climate is one of the reasons advanced for the slow pace of growth in Nigeria; evidenced by the absence or inadequate amount...

Stock market development and investment growth in Nigeria

Publié en ligne: 23 juil. 2021

Pages: 99 - 117

Reçu: 19 mars 2020

Accepté: 31 déc. 2020

DOI: https://doi.org/10.22367/jem.2020.42.05

Mots clés
Auto-Regressive Distributed Lag, investment growth, Nigeria, Stock Market

© 2020 Idowu Daniel Onisanwa et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial 4.0 International License.

Stock market development and investment growth in Nigeria

Publié en ligne: 23 juil. 2021

Pages: 99 - 117

Reçu: 19 mars 2020

Accepté: 31 déc. 2020

DOI: https://doi.org/10.22367/jem.2020.42.05

Mots clésAuto-Regressive Distributed Lag, investment growth, Nigeria, Stock Market

© 2020 Idowu Daniel Onisanwa et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial 4.0 International License.

Mots clés
Auto-Regressive Distributed Lag, investment growth, Nigeria, Stock Market