IMPACT OF CAPITAL MARKET ON NIGERIAN ECONOMY, 1981 - 2014

This study examined the impact of the capital market on Nigerian economy. Time series data were collected on Real Gross Domestic Product, Market Capitalization, All Share Index and Turnover Ratio from 1981 - 2014. The study employed Unit root, Cointegration and Granger Causality Tests as well as Ordinary Least Square method in the empirical analysis. The unit root tests show that the variables were not stationary at level but all became stationary at first difference. They were said to be integrated of the order one, 1(1) at first difference. The Cointegration Test revealed that all the variables were cointegrated, showing a long-run equilibrium relationship between capital market and Nigerian economy. The Granger Causality Test shows a unidirectional causality between the variables in the model. The OLS result indicates that the coefficient of determination, i.e. the R-squared has a value of 0.988849. This implies that 98 percent changes in the Real Gross Domestic Product of Nigeria could be attributed to the independent variables. The MCAP & TURNR have coefficient values of 0.899656 and 0.375083 with t-statistic of 14.60231 and 2.879237 respectively. The All Share Index (ASHI) has negative coefficient value of -0.265177 and t-statistic value of -5.667988. The implication of these findings is that the capital market in Nigeria appears not to be contributing enough to the economy as ASHI seen in economic literature as a better stock market indicator than MCAP and TURNR has negative impact on the economy. The findings support the Efficient Market Hypothesis. The study recommend improved information on past performances of companies, equity returns, equity prices, and stock/company listing to avoid unreasonable speculation by investors in financial assets. It will improve the performance of capital market in Nigeria.