The Role of Stock Market Development on Economic Growth in Nigeria: A Time Series Analysis

  • UB Alajekwu
  • A Achugbu


This study investigated the role of stock market development on economic
growth of Nigeria using a 15-year time series data from 1994-2008. The
method of analysis used is Ordinary Least Square (OLS) techniques. The
study measures the relationship between stock market development indices
and economic growth. The stock market capitalization ratio was used as a
proxy for market size while value traded ratio and turnover ratio were used
as proxy for market liquidity. The results show that market capitalization and
value traded ratios have a very weak negative correlation with economic
growth while turnover ratio has a very strong positive correlation with
economic growth. Also, stock market capitalization has a strong positive
correlation with stock turnover ratio. This result implies that liquidity has
propensity to spur economic growth in Nigeria and that market capitalization influences market liquidity. We should view with caution the notion that stock market size is not significant for economic growth since multicollinearity exists in the data used for this analysis. The government should make policies that boost the interest of domestic investors in Nigeria as this might spur investors’ interest and boost stock market activity.

Journal Identifiers

eISSN: 2070-0083
print ISSN: 1994-9057