IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v3y2019i11p83-90.html
   My bibliography  Save this article

The Impact of the Capital Market on Investment in the Real Sector of the Nigerian Economy

Author

Listed:
  • Enaruna, Dubem Victor

    (Nigeria Maritime University, Nigeria)

  • Okene, Anthony Jovwo (ACA)

    (Nigeria Maritime University, Nigeria)

Abstract

Many efforts have been made towards understanding the relationship between the capital market and investment in the real sector of Nigeria. The objective was set to examine the impact of capital market on investment in Nigeria. The review of theoretical and empirical literature provided a basis for the selection and specification of model which was used to show if and how the capital market impacts investment growth. The data used in carrying out this research was sourced from the Central Bank of Nigeria statistical bulletin, 2016. The sample size employed for this study covers a period of 36 years (1981-2016). Preliminary tests were done such as Phillips-Perron unit root test for stationarity of the variables, the Johansen co-integration test was used to ascertain if there’s an equilibrium long run relationship between the variables. This study also uses the Error Correction Mechanism (ECM) to determine the impact of market capitalization, aggregate savings, new issues, interest and inflation rates on the gross fixed capital formation in Nigeria. The result of the study shows that the capital market has a significant impact on capital formation in Nigeria. The potentials of the capital market in fostering investment growth in Nigeria were evaluated by using forecasting techniques and it was seen that investmentwill drastically decline without an active capital market.On the strength of this evidence, one of the proffered recommendations is that government should introduce policies to encourage investors in the capital market.

Suggested Citation

  • Enaruna, Dubem Victor & Okene, Anthony Jovwo (ACA), 2019. "The Impact of the Capital Market on Investment in the Real Sector of the Nigerian Economy," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 3(11), pages 83-90, November.
    • Handle: RePEc:bcp:journl:v:3:y:2019:i:11:p:83-90
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-3-issue-11/83-90.pdf
    Download Restriction: no
    File URL: https://www.rsisinternational.org/virtual-library/papers/the-impact-of-the-capital-market-on-investment-in-the-real-sector-of-the-nigerian-economy/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Obstfeld, Maurice, 1994. "Risk-Taking, Global Diversification, and Growth," American Economic Review, American Economic Association, vol. 84(5), pages 1310-1329, December.
    2. Ali Raza & Zeshan Ahmed & Mohammad Ahmed & Tanvir Ahmed, 2012. "The Role of FDI on Stock Market Development: The Case of Pakistan," Journal of Economics and Behavioral Studies, AMH International, vol. 4(1), pages 26-33.
    3. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-558, June.
    4. Samson E. Edo, 2011. "Capital market development in an emerging economy and the challenge of fostering foreign participation," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 4(2), pages 195-215.
    5. Demirguc-Kunt, Ash & Levine, Ross, 1996. "Stock Markets, Corporate Finance, and Economic Growth: An Overview," The World Bank Economic Review, World Bank, vol. 10(2), pages 223-239, May.
    6. Charles Amo Yartey, 2008. "The Determinants of Stock Market Development in Emerging Economies: Is South Africa Different?," IMF Working Papers 2008/032, International Monetary Fund.
    7. Samson E. Edo, 1997. "The Nigerian Capital Market in an Era of Privatisation," Vision, , vol. 1(2), pages 45-54, July.
    8. Bencivenga, Valerie R & Smith, Bruce D & Starr, Ross M, 1996. "Equity Markets, Transactions Costs, and Capital Accumulation: An Illustration," The World Bank Economic Review, World Bank, vol. 10(2), pages 241-265, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sin-Yu Ho & N.M. Odhiambo, 2018. "Analysing the macroeconomic drivers of stock market development in the Philippines," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1451265-145, January.
    2. Castaneda, Gonzalo, 2006. "Economic growth and concentrated ownership in stock markets," Journal of Economic Behavior & Organization, Elsevier, vol. 59(2), pages 249-286, February.
    3. Valeriano F. García & Lin Liu, 1999. "Macroeconomic Determinants of Stock Market Development," Journal of Applied Economics, Universidad del CEMA, vol. 2, pages 29-59, May.
    4. Sin-Yu Ho & Nicholas M. Odhiambo, 2019. "The macroeconomic drivers of stock market development: evidence from Hong Kong," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 12(2), pages 185-207, July.
    5. Sin-Yu Ho, 2018. "Macroeconomic determinants of stock market development in South Africa," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 14(2), pages 322-342, December.
    6. Salvatore Capasso, 2006. "Stock Market Development and Economic Growth," WIDER Working Paper Series RP2006-102, World Institute for Development Economic Research (UNU-WIDER).
    7. Salvatore Capasso, 2006. "Stock Market Development and Economic Growth: A Matter of Information Dynamics," CSEF Working Papers 166, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    8. Hondroyiannis, George & Lolos, Sarantis & Papapetrou, Evangelia, 2005. "Financial markets and economic growth in Greece, 1986-1999," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(2), pages 173-188, April.
    9. Khan, Muhammad Imran & Teng, Jian-Zhou & Khan, Muhammad Kamran & Jadoon, Arshad Ullah & Khan, Muhammad Fayaz, 2021. "The impact of oil prices on stock market development in Pakistan: Evidence with a novel dynamic simulated ARDL approach," Resources Policy, Elsevier, vol. 70(C).
    10. Alessandro Giovannini & Maurizio Iacopetta & Raoul Minetti, 2013. "Financial Markets, Banks, and Growth : Disentangling the links," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 105-147.
    11. Ho, Sin-Yu, 2017. "The Macroeconomic Determinants of Stock Market Development: Evidence from Malaysia," MPRA Paper 77232, University Library of Munich, Germany.
    12. ABOUDOU Maman Tachiwou, 2009. "Causality tests between stock market development and economic growth in West African Monetary Union," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 12(2), pages 14-27, December.
    13. Sin-Yu Ho, 2018. "Determinants of economic growth in Hong Kong: The role of stock market development," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1510718-151, January.
    14. Misati, Roseline Nyakerario & Nyamongo, Esman Morekwa, 2011. "Financial development and private investment in Sub-Saharan Africa," Journal of Economics and Business, Elsevier, vol. 63(2), pages 139-151, March.
    15. Misati, Roseline Nyakerario & Nyamongo, Esman Morekwa, 2011. "Financial development and private investment in Sub-Saharan Africa," Journal of Economics and Business, Elsevier, vol. 63(2), pages 139-151.
    16. Durusu-Ciftci, Dilek & Ispir, M. Serdar & Yetkiner, Hakan, 2017. "Financial development and economic growth: Some theory and more evidence," Journal of Policy Modeling, Elsevier, vol. 39(2), pages 290-306.
    17. Raza, Syed Ali & Jawaid, Syed Tehseen & Afshan, Sahar, 2013. "Is Stock Market Sensitive to Foreign Capital Inflows and Economic Growth? Evidence from Pakistan," MPRA Paper 48399, University Library of Munich, Germany.
    18. Minier, Jenny, 2009. "Opening a stock exchange," Journal of Development Economics, Elsevier, vol. 90(1), pages 135-143, September.
    19. Keith Blackburn & Niloy Bose & Salvatore Capasso, 2005. "Financial Development, Financing Choice and Economic Growth," Review of Development Economics, Wiley Blackwell, vol. 9(2), pages 135-149, May.
    20. Arnold, Lutz & Walz, Uwe, 2000. "Financial regimes, capital structure, and growth," European Journal of Political Economy, Elsevier, vol. 16(3), pages 491-508, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:3:y:2019:i:11:p:83-90. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Renu Malsaria (email available below). General contact details of provider: https://www.rsisinternational.org/journals/ijrsi/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.