The impact of the stock exchange market as a vehicle for growth is well known in the literature. However, it is argued that under-developed economies may not experience the expected growth due to the poor deepening of the market. The paper examines the impact of stock exchange market on the Nigerian economy. The study is apt as it evaluated the impact of the stock exchanges market in the provision of the much needed long-term funds for the industries to stimulate growth that assists the government to meet its developmental goals within the economy. It conducts a multiple regression and uses market variable that are considered very crucial to the survival of the market. The result support existing literature about the impact of stock exchange market on the economy and provides better insight into the activities of the market. It also suggest that all aspects of the market included in the study are essential ingredient for the growth of the Nigerian economy.





Title page                                                                 i

Certification                                                             ii

Dedication                                                               iii

Acknowledgement                                                    iv

Abstract                                                                   vi

Table of content                                                       viii


1.1   Background of the study                                  1

1.2   Statement of the problem                                        5

1.3   Objectives of the study                                     6

1.4   Significance of the study                                  7

1.5   Research questions and hypotheses                        8

1.6   Scope and delimitation of the study                9

1.7   Organization of the study                                         9



2.1   Introduction                                                     11

2.2   Stock exchange market and economic growth         12

2.1.1        Definition of stock exchange market                        18

2.2.3 Overview of the nigeria stock

exchange market                                             19

2.2.4 The nigeria security and exchange

Commission                                                     23

2.2.5 The nigerian stock exchange                          26

2.2.6 Economic growth                                            28

2.2.7 Impact of stock exchange market on

economic growth of Nigeria                              29

2.3   Empirical review                                              31

2.3.1        Empirical review on other countries                        32

2.3.2        Empirical review on Nigeria                             34



3.1   sources of data                                                38

3.2   method of data analysis                                   38

3.3   model specification                                          39


4.1   data presentation                                             41

4.2   presentation of results                                     44

4.3   discussion of result                                         45


5.1   Summary                                                         48

5.2   Conclusion                                                      50

5.3   Policy recommendation                                    51

References                                                       54







The stock exchange market is a highly specialized and organized financial market and indeed essential agent of economic growth because of its ability to facilitate and mobilize sarong and investment to a great extent, the positive relationship between capital accumulation real economic growth has long been affirmed in economic theories (Anyanwu,1993)

Success in capital accumulation and mobilization for development varies among nations, but it is largely dependent on domestic savings and inflow of foreign capital.     Therefore, to arrest the menace of t he current economic, downturn, effort must be geared towards effective resource mobilization. It is in realization of this that consideration is given stock exchange market as an institution for the mobilization of finance from the surplus sectors to the deficit sectors.

The development of stock exchange market on Nigeria, as in other developing comities has been induced by the Government. Prior to the establishment of stock market in Nigeria, there existed some less formal market arrangement for the operation of stock exchange market.

It was not prominent unit the visit of 1 Mr. J.B. Lobynesion in 1959, on the invitation of the Federal Government, to advice on the role the Central Bank could play on the development of local money and stock exchange market. As a following to this the Government commissioned and set up the Bareback committee to study and make recommendation on the ways and means of establishing a stock market in Nigeria as a formal stock exchange market. Acting on the recommendation of the committee the Lagos stock Exchange (as it was called them) was set-up in March 1960,  and in September 1961, it was incorporated under section 2 cap 37, through the collaborative effort of Central Bank of Nigeria, the business community and industrial Development Bank  (Alile & Anao, 1990) with the establishment of the Central Bank of Nigeria in 1959 and the coming into existence of the Lagos stock Exchange in 1961 and subsequently, the Nigeria stock Exchange by an act in 1979, a sound foundation was  laid for the operation of the Nigeria stock Exchange market for trading on securities of long term nature needed for the finances of the industrial sector and the economy at large. After the incorporation of the Lagos Stock Exchange, it was granted.

Further protection under the law and its activities was placed under some sort of control by the Government, hence the passing of the Lagos Stock Exchange Act. Hoverer, the Lagos Stock Exchange was only operational in Lagos. By the mid 1970’s the need for an efficient financial system for the whole nation was emphasized and a review by the Government of the operations of the Lagos stock Exchange market was advocated. The review was carried out to take care of the low capital formation, the unsatisfactory demarcation between the operation fo commercial Banks and the emerging class of the Merchant Banks, and the extremely shallow depth of the capital.

In response to the problem mentioned, above, the government accepted the principle of decentralization but opted for a National Stocks Exchange which will have branches in different parts of the country. On December 2nd 1977, the memorandum and article of association creating the Lagos Stock Exchange was transformed into the Nigeria Stock Exchange, with broaches in Lagos, Kaduna, Port-Harcourt, Yola and now in Federal Capita Territory (FCT) Abuja and some other cities. The history of Nigeria Stock Exchange market could be traced to 1946 when the British colonial administration floated a N600,000 local loan stock bearing interest at 3 ¼ % for the financing of developmental projects under the Ten Years Plan Local ordinance. The loan stock, which had a maturity of 10-15 years, was oversubscribed in more than N1million; yet local participation of the issue was terribly poor. Certainly potential fund abound in Nigeria, but the overriding consideration in this project is to examine the impact of the stock exchange market in harnessing and mobilizing these resource (fund) to generate economic growth in the country and consequently economic development.


There is abundant evidence that most Nigeria business lack long-term capital. The business sector has depended marshy on short-term financing such as overdraft to finance even long-term capital. Based on the maturity matching concept, such financing is risky. All such form need to raise an appropriate mix of short and long term capital (Demirguc-Kunt & Lerine 1996).

Most recent literatures on the Nigeria stock exchange market have recognized the tremendous performance the market has recorded on recent times. However, the vital role of the stock exchange market in economic growth and development has not been empirically investigated thereby creating a research gap in this area. This study is undertaken to examine to contribution of the stock exchange market in the Nigerian economic growth and development. Aside the social and intuitional factors inhibiting the process of economic development of Nigeria, the bothleneck created by the death of finance to the economic constitutes a major setback to its development. As a result, it is necessary to evaluate the Nigeria stock exchange market.


The broad objective of this study examined the activities and performance of Nigeria stock exchange market. The specific objectives of the study are as follows:

  1. To examines the operations of the Nigeria Stock Exchange Market.
  2. To evaluate the performance of the stock exchange market in relation to the economic growth in Nigeria.
  3. To examine the rate at which new stock are issued on the stock exchange market.
  4. To make recommendations as to how to operations of the market could be improved to boost economic growth and development of Nigeria.


The study explored the impact or effectiveness of stock exchange market instruments on Nigeria economic growth through the scope of the study was limited to the stock exchange market, it is hoped that the exploration of this market will provide a broad view of the operations of the stock exchange market. It will contribute to existing literature on the subject matter by investigating empirically the role, which the stock exchange market plays in the economic growth and development of the country. The main importance of this study is that it will provide policy recommendation to policy markers on ways to improve operation and activities of the stock exchange market.


This research was guided by the following research questions

  1. How is the operation of Nigeria stock exchange market?
  2. What is the performance of the stock exchange market in relation to economic growth in Nigeria?
  • What is the rate at which new stock are issued on the Nigerian stock exchange market?
  1. How could the stock exchange market through its crucial role stimulate economic growth in Nigeria?

The hypothesis that would be tested in the course of this research is stated below as:

Ho1: That the stock exchange market operation have no impact on Nigeria economic growth.


The economy is a large component with lot of diverse and sometime complex parts this research work only looked at a particular part of the economy (the financial sector). This word did not cover all the facts that make up the financial sector, but focus only on the stock exchange market and its activities as it impacts on the Nigeria economic growth. The empirical investigation of the impact of the stock exchange market on the economic growth in Nigeria was restricted to the period between 1980 and 2009 due to the non –availability of some important data.  


The study is divided into five (5) chapters and organized as follows:

Chapter one from the introduction part, this is where the mown theme of the research is given. It comprises the statement of the problem, objectives of the study, research question and hypothesis, significance of the study, scope and delimitation of the study and organization of the study.

Chapter two is the literature review of the impact of stock exchange market on the economic growth of Nigeria.

Chapter three from the research methodology which includes sources of data, method of data analysis and model specification.

Chapter four is the data analysis while chapter five includes the summary, conclusion and recommendation.








Stock exchange market is defined as the market where medium to long terms finance can be raised. The stock exchange market is the market for dealing that is lending and borrowing in long term loan able funds.

Substantial academic literature and government strategies support the finance led growth hypothesis based on an observation first made almost an century ago by Joseph Schumpeter that financial market significantly boost real economic growth and development. Schumpeter asserted that finance had a positive impact on economic growth as 1989 the World Bank also endorsed the view that financial deepening matters for economic growth “by improving the productivity of investment” (Wikipedia, 2011).

Mbat (2001) described it as a forum through which long term funds are made available by the surplus to deficit economics units. It must however, be noted that although all surplus economic units have access to the stock exchange market, not all the deficit economic units have the same easy access to it. The restriction on the part of the borrowers is meant to enforce the security of the funds provided by the lenders. In order to ensure that lenders are not subjected to undue risks the borrowers in the capital need to satisfy certain basic requirement. It has very profound implication for the socio-economic growth and development of any nation.



In principle, the capital (Stock) market is expected to accelerate economic growth, by providing a boost to domestic savings and increasing the quantity and quality of investment. The market is expected to encourage savings by providing individual with an additional financial investment that many better meet their risk preferences and liquidity needs. Better savings mobilization may increase the saving rate.

The stock exchange market also provides an avenue for growing companies to raise capital at lower loaf.

In addition, companies in countries with developed stock market are less dependent on bank financing, which can reduce the risk of a credit crunch. The stock exchange market therefore is able to positively influence economic growth through encouraging savings among individuals and providing avenues for form financing (Charles & Charles 2007).

Stock exchange market offers access to a variety of financial instrument that enable economics agent to pool prince and exchange. Through assets with attractive yields liquidity and risk characteristics. It encourage savings on financial form this is very essential for government and other institution in need of long term funds and for supplies of long term funds companies can finance their operation by raising funds through issuing equity (ownership) or debenture bond borrowed as securities. Equity have perpetual life while debenture/bond issues are structures to mature in period of years varying from the medium to long-term of usually between force and twenty five years (Mbat 2001).

Based on the performance of stock exchange in accelerating economic growth, government of most nations tends to have keen interest on its performance the concern is for sustained confidence in the market and for a strong investor’s protection arrangement. Economic growth is generally agreed to indicate developing of an economy, because it transform a country from a fire percent savers to a fifteen percent saver. This it is argued that for stock exchange market to contribute or impact on the economic growth in Nigeria, it must operate efficiently, confidence will be generated in the minds of the public and investors will be willing to part with hard earned finds and in rest them in securities with the hope that in future they will recoup their investment (Ewah et al, 2009).

The theoretical explanation on the nexus between stock exchange market and economic growth is further expanciated suing efficient market hypothesis (EMH) developed by Fama in 1965 – According to EMH financial market are efficient of prices untraded assets that have already reflected all known information and therefore are unbiased because they represent the collective belief of all investors about future prospects previous test of the EMH have relief on long-range dependence of equity returns. It shows that past information have been found to be useful in improving predictive accuracy. This assertion tend to invalidate the EMH is not developing countries.

Equity prices would tend to exhibit long memory of long memory or long range dependence; because of the narrowness of their market arising from immature regulatory and institutional arrangement. They noted that, where the market is highly and unreasonably speculative, investors will be discouraged from parting with their funds for fear of incurring financial losses. In situation like the one mentioned above has detrimental effect on economic growth of any country meaning investors will refuse to invest in financial assets.

The implication is that companies cannot raise additional capital for expansion. Thus, it suffices to say that efficiency of the stock exchange market is a necessary condition for growth on Nigeria (Nyong, 2003).

Ariyo and Adelegan (2005) content that, the liberalization of stock exchange market contributes to the growth of the Nigeria stock exchange, yet it impact on the macro-economy is quite negligible.

In another exposition, Gabriel (2002) as enunciated by Nyong (2003) lay emphasis on the Romanian stock exchange market and conclude that the market is inefficient and hence it has not contributed to economic growth in Romania.

Ekundayo (2002) argues that a nation requires a lot of local and foreign investment to attain sustainable economic growth development. The stock exchange market provides a means through which this is made possible.

Ewah, et al (2009) stock exchange market provides the opportunities for the purchase and sale of existing securities among investors thereby encouraging the populace to invest in securities fastening economic growth.




The literature involves citing deferent contribution, on what stock exchange market is all about what means to follow in haring a strong, viable and reliable market.

Jhingan (2004) the stock exchange market is a market which deals in long term loans. It supplies industries with fixed and working capital and finance medium term and long term borrowings of the central, states and local governments. Thus the stock exchange market comprises the complex of institutions and mechanisms through which medium term funds and long term funds are pooled and made available to individual business and governments.

The stock exchange market has been identified as an institution that contributes to the socio-economic growth and development of enraging and developed economies. This is made possible through some vital roles played, such as channeling resources, promoting reform to modernize the financial sectors, financial intermediation capacity to link deficit to surplus sector of the economy, and a veritable tool on the mobilization and allocation of savings among competitive use which are critical to the growth and efficiency of the economy (Pat and James, 2010)


The stock exchange market is cornerstone of every financial system since it provides the funds needed for financing not only business and other economic needs, but also the programme of Government as whole.

The stock exchange market is essentially a market for long term securities that is stock debenture and bounds lasting for usually longer than three years.

The proper functioning of the stock exchange market was not set up until the establishment of the Central Bank in 1959 and launching of the Lagos stock exchange in 1961.

The need to have an organized stock exchange came up and committee was set up by the government under the chairmanship of Prof R.W. Barr  bock to consider the feasibility of having indigenous forum for the purchase and sales of share and stock.

The Nigeria stock exchange market was established for the following reasons below:

  1. T overcome difficulties of selling government stock.
  2. To provide local opportunities and landing for long term purpose
  • To enable authorities mobilized long term capital for economic growth and development.
  1. To enable the foreign business the term chance of offering their share to interested Nigerians to invest and participate in the ownership of these foreign business.

In view of the above the major participants in stock exchange market are:

  1. Government
  2. Quated companies (listed companies)
  • Stock brokers
  1. Central Bank of Nigeria (CBN)
  2. Banking and non banking financial institution
  3. Nigeria stock exchange
  • Nigerian securities and exchange commission

Functions of the stock exchange market

  1. The promotion of rapid capital
  2. It is machinery for mobilizing long-term financial resources for industrial development
  3. The provision of an alternatives sources of fund other than taxation for government.
  4. The mobilization of saving from numerous economic units for growth and development.
  5. The provision of liquidity for any investor or growth of investors
  6. The broadening of the ownership base of assets and the creation of a healthy private sector.
  7. It is an avenue for effecting payment of debts.
  8. The creation of a built in operational and allocation efficiency within the financial system to ensure that resources are optimally utilized at relatively little cost.
  9. It is a necessary liquidity mechanism for investors through a for male market for debt and equity securities.




The Nigeria Security and exchange commission (NSEC) is the apex institution for the regulation and monitoring of the Nigeria Stock Exchange market. The commission was established under the security and exchange commission decree 1979, operating retrospective from 1st April, 1978.

Prior to the SEC, two bodies had in succession been responsible for the monitoring of stock exchange market activities in Nigeria. The first was capital issues committee which operated between 1962 and 1972. It could not be seen as the superintended of the stock exchange market because its function were more or less advisory without the force of instruction even through its functions included the coordination of stock exchange market activities. The next body was the stock exchange market issues commission (CIC) which came into being in March 1973. The CIC, unlike its predecessors had full powers to determine the price, timing and volume of security to be issued. Despite this wider power, the CIC could not be seen as the apex of stock exchange market because it concerned itself with public companies alone and its activities did not cover the stock exchange and government securities.

The enabling Act of the Securities and Exchange Commission specifies its overriding objectives as investors, protection and development while its functions were divided into two regulatory and development.

The functions of the commission are extensively spelt out in Nigeria Securities and Exchange Commission Decree (Decree No 29) of 1983 and the Nigeria Enterprises Promotion Decree 1990. According to section (6) subsection (9) to (10), the commission is charged with the following duties and functions.

  1. Determining the amount of price and time when securities of companies are to be sold to the public whether through offer for sale or subscription.
  2. Registering all securities proposed to be offered for sale or for subscription by the public.
  • Maintaining surveillance over the securities market to ensure orderly, fair and equitable dealing in securities.
  1. Protecting the integrity of the security market against any abuses arising from the practice of insider training.
  2. Acting as regulatory apex organization for the Nigeria Stock Exchange Market including the Nigerian Stock Exchange and its branches to which it would be at liberty to delegate power.
  3. Creating the necessary atmosphere for the orderly growth and development of the stock exchange market.
  • Reviewing, approving and regulating merger acquisition and all forms of business combination.
  • Registering stock exchange or their branches, registers investment advisers, securities dealers and their agents and controlling and supervising their activities with a view to maintaining proper standards of conduct and professionalism in the securities business.
  1. Undertaking such other activities as are necessary or expedient for giving full effect to the provision of this decree.


As one of the constituencies of the stock exchange market, the exchange is a private, non – profit making organization, limited by guarantee. It was incorporated via the inspiration and support of businessmen and the Federal Government. But owned by about 300 members, the membership includes financial institution, stockbrokers and individual Nigerians of high integrity, who have contributed to the development of the stock market and Nigeria economy.

The Nigeria Stock Exchange started with the incorporation of the then Lagos Stock exchange in 1960. Trading commenced on the exchange in 1961 after the enactment of the Lagos Stock exchange act of 1961, the self regulatory organization was subsequently re organized and renamed the Nigeria Stock Exchange 197 based on the report and recommendation of Pius Okigbo financial system review commission.

The stock exchange is thus an institution of stock exchange market, which provides trading floors where all dealing members operates on every business day. The exchange now has nine (9) branches and all the branches function principally as trading floor.


  1. To provide opportunities for raising new capital.
  2. To promote increasing participation by the public in the private sector of the economy.
  • To provide a central meeting place for members to buy and sell existing stock and share and for granting quotation to new ones.
    1. To provide appropriate machinery to facilitate further offerings of stocks and share to the public.
    2. To reduce the risk of liquidity by facilitating the purchasing and sale of securities (Al-faki, 2007)


Economic growth means an increase in the capacity of an economy to produce goods and services compared from one period of time to another. Economic growth is a process by which a nation’s wealth increases over time. The most widely used measures of economic growth is a growth in a country’s total output of goods and services gauged by the gross domestic product (GDP).


Economic growth can also refers to as the increase of per capital gross domestic product (GDP) or other measure of aggregate income, typically reported as the annual rate of change in the real GDP.


Economic growth is primarily driven by improvement in productivity which involves producing more goods and services with the same inputs of labour, capital, energy and materials, (Wikipedia)


The Nigeria stock exchange market provides the necessary lubricant that keep turning the wheel of the economy. It not only provides the funds required for investment but also efficiently allocates these funds to projects of best returns to funds owners.

The market is very vital to the growth and development of any country because it support government and corporate initiative finances the exploitation of new ideas and facilitate the management of financial risk.

The stock exchange market has impacted on economic growth and development of Nigeria through the following.

  1. The stock exchange market encouraged the inflow of foreign capital when foreign companies or investors invest in domestic securities.
  2. It reduces the over reliance of the corporate sector on short term financing for long term projects and also provided opportunities for government to finance projects aimed at providing essential amenities for socio – economic development.
  • The stock exchange market aid the government in privatization programme by offering her shares in the public enterprises to member of the public through the stock exchange.
  1. It has impacted positively by providing avenue for the marketing of shares and other securities in order to raise fresh fund for expansion of operations leading to increase production/output.
  2. The market provides means of allocating the nation’s real and financial resources between various sectors, industries and companies. Through the capital formation and allocation mechanism the market efficiently distributes the scarce resources for the optimal benefit to the economy.


The link between stock exchange market and economic growth has been empirically investigated by researchers on both Nigeria and other countries.



Demetriades, et al (2001) utilized time series data from free developed countries, to examine the relationship between stock market and economic growth, controlling for other effect of the banking system and stock market volatility. Their result supports the view that, although banks and stock market may promote economic growth, the effect of bank is more. They suggested that the contribution of stock market to economic growth may have been exaggerated by studies that uses cross country regressions.

Mohtadi and Agarwal (2004) examined the stock exchange market and economic growth in developing countries using a panel data approach that covers 21 emerging market over 21years (1977 – 1997), they found that turnover ratio is an important and statistically insignificant determinant of investment by form and that these investment in turn are significant determinant of aggregate growth. Foreign direct investment is also found to have a strong positive influence on aggregate growth. The result of their study indicates that both turnover ratio and market capitalization are important variable as determinants of economic growth.

Nieuwerburgh, et al (2005) investigated the long term relationship between capital (stock) market development and economic growth in Belgium. Their result shows that the market causes economic growth in Belgium.

Mishra, et al (2010) examined the impact of stock exchange market efficiency on economic growth in India using the time series service data on market capitalization, total market turnover and stock price index over the period. Spanning from the first quarter of 1991 to the first quarter of 2010. Their study reveals that there is a linkage between stock exchange markets efficiency and economic growth in India. This linkage is established through high rate of market capitalization and total market turnover. The large size of stock exchange market as measured by greater market capitalization is positively correlated with the ability to mobilize capital and diversity risk on an economy wide basis. The increase tend of market capitalization in India would certainly bring stocks exchange market efficiency and thereby contribute to the economic growth of the country.


Osinubi and Amajbionyeodiwe (2003) examined the relationship between the Nigeria Stock Market and economic growth during the period 1980 – 2000. Unfortunately, their result did not support the claim that stock market development promotes economic growth.

Adam and Sanni (2005) examined the role of stock market on Nigeria’s economic growth using Granger Casuality test and regression analysis. The study discovered a one way causality between GDP growth market capitalization and a two way causality between GDP growth and market turnover. They also observed a positive and significant relationship between GDP growth turnover ratios. The study advised that government should encouraged the development of the stock exchange market since it has a positive relationship with economic growth.

Obamiro (2005) investigated the role of the Nigeria Stock Market in the light of economic growth. The author reported a significant positive effect of stock market on economic growth. He suggested that government should create more enabling environment so as to increase the efficiency of the stock market, and to attain higher economic growth.

Ewah, et al (2009) appraised the impact of the Nigeria Stock Exchange market efficiency on the economic growth on the nation using time series data from 1961 – 2004. The found that the stock exchange market in Nigeria has potential for growth inducing but it has not contributed meaningfully to the economic growth of Nigeria because of how market capitalization, illiquidity, misappropriation of funds among others.

Ezeoha, (2009) investigated the nature of the relationship that exists between stock market development and the level of investment (domestic private investment and foreign private investment) flows in Nigeria. The study discovered that stock market development promotes domestic private investment flows, thus suggesting the enhancement of the economy’s production capacity as well as promotion of the growth of the National output. However, the result show the stock development has not been able to encourage the flow of foreign private investment in Nigeria.

Afeez and Kazeem (2010) critically and empirically examined the causal linkage between stock market and economic growth in Nigeria between 1970 and 2004. The indicator of the stock market development used are market capitalization ratio, total value rated ratio and turnover ratio while the growth rate of gross domestic product is used as proxy for economic growth, using the Granger Casualty (GC) test, the empirical evidence obtained from the estimation process suggests a bidirectional causality between turnover ratio and economic growth, a                uni-directional relationship from market capitalization to economic growth and no causal linkage between total value traded. The result of the causality test is sensitive to the choice of variable used as proxy for Stock (Capital) market. Overall the result of the GC test suggested that Stock exchange market drive economic growth.









This chapter included sources of data, method of data analysis and model specification.


The data for this study was obtained mainly from secondary sources particularly from Central Bank of Nigeria (CBN), Statistical Bulletins, Nigeria Stock Exchange (NSE), fact books, security and exchange commission (SEC) market bulletins and relevant journals.


The procedure for analyzing the data was econometric procedure. Here the technique used was the multiple regression analysis to test whether the stock exchange market indices have impacted on the economic growth of Nigeria proxy by Gross Domestic Product (GDP)


Mode which specifies that economic growth (Proxy by Gross Domestic Product (GDP)) is significantly influenced by the stock exchange market indices (market capitalization, new issues, value of transaction and total listing) is formulated as follows:


LnGDP =    α0+ α1LnMCAP+ α2LnTNI+ α3LnVTS+ α4LnTLS+U


The a priori expectation is α1, α2, α3, α4 ›0

LnGDP = Gross Domestic Product

LnMCAP = Market Capitalization

LnTNI = Total New Issues

LnVLS = Total listed equity and Government stock

U       =      Disturbance Term

α       =      Intercept

α1 – α4      = Coefficient of the independent variables

Note: all variable are on their natural logarithm form.




These chapters tend to present and analyzed data with aim of scaring the role of stock exchange market on economic growth of Nigeria and it further interpret and discuss the result.


Year Real GDP Total New Issues (N)m Market Capitalization (Equities & Debt) (NB) Value of transactions (Government & Industrial Securities(NM) Total listing on the Nigeria Stock Exchange (Equity, Industrial loan & Govt. Stock)
1980 31546.8 372.2 4464.2 388.7 157
1981 205222.1 455.2 4979.8 304.8 194
1982 199685.3 533.4 4025.7 215 205
1983 185598.1 448.5 5768 397.9 212
1984 183563 159.8 5514.9 256.5 213
1985 201036.3 817.2 6670.7 316.6 220
1986 205971.4 833 6794.8 497.9 240
1987 204806.5 450.7 8297.6 382.4 244
1988 219875.6 400 10020.8 850.3 253
1989 236729.6 1629.9 12848.6 610.3 267
1990 267550 9964.5 16358.4 225.4 295
1991 265379.1 1870 23125 242.1 239
1992 271365.5 3306.3 31272.6 491.7 251
1993 274833.3 2636.9 47436.1 804.4 272
1994 275450.6 2161.7 663680 985.9 276
1995 281407.4 4425.6 180305.1 1838.8 276
1996 293745.4 5858.2 281815.8 6979.6 276
1997 302022.5 10875.7 281887.2 10330.5 264
1998 310890.1 150181.1 262517.3 13571.1 264
1999 312183.5 12038.5 30041.1 14072 268
2000 329178.7 17207.8 472290 28153.1 260
2001 356994.3 37198.8 662561.3 57683.8 261
2002 433203.5 61284 764975.8 59406.7 258
2003 477533 180079.9 1359274.2 120402.6 265
2004 52757.6 105418.4 2112549.6 225820 277
2005 561931.4 552782 2700062.1 262935.8 288
2006 595821.6 707400 512000 470253.4 294
2007 634251.1 1935080 13294059 1076020.4 310
2008 672202.6 1509230 9562970 1679143.7 301
2009 716949.7 1724214 70308 685716.2 266

Sources: Central Bank of Nigeria (CBN), NSE Statistical Bulletin (Various Issues)


Summary of the regression result

The model was transformed to the natural logarithm.

LnGDP = 2.33207 – 0.0638544LMCAP + 0.116748LVLS + 2.72605LTLS

S.E = (2.25664) (0.0362538)x (0.0275652) x x x(0.460238) x x x   R2 = 0.835878

R2 = 0.816941

P – Value (F) = 2.41e-10

DW = 1.507042


x statistically significant at 10% level of significance

xx statistically significant at 5% level of significance

xxx statistically significant at 1% level of significance


The regression result as shown above revealed that three variables are statistically significant, two at 1% and one at 10% level of significance, on the basis of apriori expectation the coefficient of two of the variable that is log value of transactions (LnVLS) and Log total listed security (LnTNS) and log total listed security (LnTLS) are positively signed while the coefficient of log market capitalization (LnMCAP) is negatively signed.

The LnMCAP is significant at 10% level of significance which conformed to the aprior expectation. This implies that 10% increase of LnMCAP leads to 6.3% increase in GDP. Also it is found that LnTLS is also significant at 1% of significance, this means that 1% increase in LnTLS leads to increase in GDP by 272.605%. The LnVLS is also significant at any level of significance; this means that 1% increase LnVLS leads to 11.67704% increase in GDP. The constant is not statistically significant at any level of significance.

The implication is that the economy responds favorable to measure taken to increase total listing of equities and government stock, market capitalization and value of transaction in Nigeria Stock Exchange.

R2 (Coefficient Of Determination) shows that 83.5% of total variation in the dependent variable (GDP) is explained by LnMCAP, LnVLS, LnTLS and it drops to 81.6% after adjustment for degree of freedom.

DW (Dubin – Watson) = 1.50702 shows that there is element of positive autocorrelation meaning that there is a linear relationship between Gross Domestic Product (GDP) and the Independent Variable.

The t-value of LnMCAP (-1.7613) which is negatively signed has significant impact on the economic growth.

The negative sign of the LnMCAP may not be unconnected with the yet shallow nature of the Nigeria Stock Exchange Market even through the VLS and TLS tends to have improved remarkably since the banking consolidation in 2005.

However, LVLS and LTLS were positively signed and so statistically significant at 1% level. The finding agree with Ariyo and Adelegan (2005) and Ewah, etal (2009) who found or asserted that stock exchange market had a positive impact on economic growth and development of Nigeria. But has not contributed meaningfully to economic growth and development due to low market capitalization (MCAP), low volume of transaction, far listed companies illiquidity  etc also the result show no positive relationship between the stock exchange market and economic growth and development.






The study examined the impact of stock exchange market on economic growth of Nigeria between 1980 – 2009. The finding of the study reveals the following:

  • The regression result confirms that there exists positive relationship between the stock exchange market and economic growth. The relationship is statistically significant. This is in essence means that the impact of the stock exchange market on economic growth is strong and significant.
  • Another major outcome of the study is that a unit increase in total listing of equity and government stock (TLS) result in an increase in GDP. The implication of this is that the economy responds favorable to measures taken to increase TLS in Nigeria Stock Exchange.
  • The positive result of the total listing of equity and government in the stock exchange market are spent on productive sector which enhance economic growth.
  • The result of the value of transaction in the stock exchange market means that the simplicity in buying and selling of securities has potential to influence economic growth positively.

These findings agrees with Ewah, et-al (2009) who found that stock exchange market in Nigeria has potentials for growth inducing but has not contributed meaningfully to the economic growth of Nigeria due to low market capitalization etc.





The study reveals that the stock exchange market impact on economic growth via market capitalization, value of transaction and total listing of equity and government stock.

As it was observed, market capitalization, government stock and value of transaction are important stock exchange market variables that are capable of influencing economic growth. Hence, the stock exchange market remain one of the mainstream in every economy that has the power to influence or impact economic growth therefore the organized private sector is to invest in it. The market capitalization has not impacted significantly on the GDP while volume of transaction and total listed equities and government stock have significant impact on the GDP. The government is therefore advised to put up measures to stem up investors confidence and activities in the market and more foreign investors should be encouraged to participate in the market for improvement in the declining market capitalization so that it could contribute significantly to the Nigerian Economic Growth.



In order for the Nigeria stocks exchange market to be pivotal force Nigeria economic growth and directly prevent , the following suggestion or recommendation are put forward:

  1. There is need to ensure on the delling market capitalization by encouraging more foreign investor to participate in the market; maintain state of the art technology like automated trading and settlement practice, electronic fund clearance and eliminate physical transfers  of share.
  2. There is also need to restore of customs in the market by regulatory authorities through ensuring transparency and fair trading transition and dealing in the stock exchange. It must also address the report of case of abuse and sharp practice by some companies in the market.
  3. Since the total listing is significant at 190 level of significance but still far compare to other exchange like South African and Egypt. Therefore these should be increased in the total member environment in order to encourage foreign multinational companies (MNCS) or their subsidiaries to be listed on the Nigeria stock exchange, relax the listing requirement to the first tier market and ensure tax rationalization in the stock exchange market to encourage quotation and public interest in some holdings.
  4. Lastly, in order to boost the value of transaction in the Nigeria stock exchange, there is need for availability of more interest instrument such as derivatives, convertibles futures, and swaps option in the market.
  5. Given the present political dispensation, all the tiers of government should he encouraged to funds their realistic developmental programme through the stock exchange market. This will several as a leeway to freeing the resource that may be used in other sphere of the economy.













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