Stock market performance and economic growth in Nigeria (1984 - 2011)

The Stock Market is a specialized financial market with acclaimed capacity to facilitate and mobilize savings and investment for economic and industrial growth. As a long term security provider, the market stands out as an agent for economic growth in many world economies. This paper tries to determine whether there is any causal link between stock market performance and economic growth in Nigeria. The study is significant for policy formulation and implementation by government and other stakeholders of the Nigerian Stock Market. Time Series data on Gross Domestic Product (GDP) and key stock market performance indicators were collated for the period 1984 to 2011. The Ordinary Least Square (OLS) Technique was adopted in analysing the data. The results indicate that about 88% of the changes in economic growth could be explained by changes in stock market performance in the short run, implicating Market Capitalization (MKTCAP), Value of Transaction in the market (VALTRAN) and All share Index (ALLSVI) as significant predictors. The long run effect is shown to stand at 95% with MKTCAP and ALLSVI as having significant influences. The Error Correction Model coefficient of -0.39 suggests slow speed in operators' ability to adjust to shocks in stock market performance and in restoring investors' confidence in such circumstances. The work therefore calls on stock market regulators and operators to address key policy issues that are capable of boosting market credibility and engendering stable macro-economic environment for all players in the capital market.