Financial Development and Economic Nexus in Nigeria: The Role of the Stock Market

The stock market has been touted as catalyst for economic growth as a result of its capacity to provide access to long term capital for industrialization and other projects requiring long term capital, especially in developing countries as Nigeria. In order to establish the pattern of the finance-growth nexus in Nigeria by adopting a time series technique and applying regression model estimation, this study sought to evaluate how the stock market has impacted economic growth in Nigeria following the recent liberalization and the subsequent market integration resulting from globalization. The study found long run relationship between the Gross Domestic Product per Capital Growth Rate (GDPGR) and the explanatory variables (stock market capitalization ratio; total value of shares traded, stock turnover ratio and financial liberalization). The Granger Causality Test results showed that there is a bi-directional relationship that runs from turnover ratio (TNVR) to stock market capitalization 9SMCR) and vice versa within 5% and 10% level of significance. Also, the results also showed that gross domestic product per capital growth rate (GDPGR), stock market capitalization ratio (SMCR), total value of shares traded (STR), and financial liberalization (FINLIB) jointly have causal effects on stock turnover ratio 9TNVR).The study concluded that economic growth and development has not been found invariant to dis-equilibrium in the stock market in Nigeria. It was, therefore, recommended that a policy rethink should be fashioned out to strengthen the stock market so as to enable it to play its pivotal role in the economic growth and development of NigeriaOgbebor, Peter Ifeanyi, and Siyanbola, Trimisiu Tunji (2018). "Financial Development and Economic Nexus in Nigeria: The Role of the Stock Market." Inter. J. Res. Methodol. Soc. Sci., Vol., 4, No. 4: 29-47. (Oct. – Dec. 2018); ISSN: 2415-0371. DOI: 10.5281/zenodo.254501