The Implication of Capital Market Development on Manufacturing Sector in Nigeria Within the Framework of Ardl – Bound Testing Approach

In order to enhance manufacturing sector productivity, the sector must have access to long term funds in the economy. Previous studies that examine the effect of capital market on manufacturing sector did not capture the short run and long run effect of capital market on manufacturing using dynamic technique of Autoregressive Distributed Lag technique. Premised on this, this study explored the short run and long run effect of capital market on manufacturing output in Nigeria using Bound Test and Autoregressive Distributed Lag technique from 1985 to 2017 base on secondary data obtained Central Bank of Nigeria (CBN) Statistical Bulletin. Evidence of long run relationship was found among manufacturing output, market capitalization, volume of transactions and all share price index as indicated by Bound Test. The result of the ARDL revealed that market capitalization had significant and positive effect on manufacturing output both in the long run and short run. Also, volume of transactions had positive effect on manufacturing sector output in the short run but negative in the long run while all share price index had negative and insignificant effect on manufacturing output both in the short run and long run. The result of the granger causality test indicated that both market capitalization and all shared price index did not granger cause manufacturing sector output while volume of transaction granger cause manufacturing sector output. The implication of this study is that that, capital promote manufacturing sector productivity in the short and not in the long run in Nigeria. The study contributed to previous knowledge by investigating the dynamic relationship between capital market and manufacturing sector using a more robust technique of Autoregressive Distributed Lag technique developed by Pesaran and Shin (1999).