Capital Market Performance and Sectoral Output Growth in Nigeria (1984-2016)

Abstract

This study was carried out to investigate the effects of capital market performance on sectoral output growth in Nigeria within a temporal scope 1984-2018. The study was anchored on Ayodeji-Ajala (2018) capital market economic significance theorem; and as such, the independent variable, capital market performance, was measured by seven indicators, which are all-share index, market capitalization, number of listed equities, number of deals, stock market turnover, value of deals and value of transactions. However, to measure the dependent variable, sectoral output growth, five different models were developed, such that their respective dependent variables are contribution of agricultural sector to Gross Domestic Product (GDP), contribution of industrial sector to GDP, contribution of construction sector to GDP, contribution of trade sector to GDP, and contribution of service sector to GDP. With respect to these proxies, the study sourced annualized time-series data from the capital market bulletins of the Nigerian Securities and Exchange Commission and the statistical bulletins of the Central Bank of Nigeria, and estimated them using auto regressive distributed lad model. The study found that, on the effects of capital market performance on agricultural sector output, ASI, MCAP, VTRAN and NLE exerted significantly positive long-run effects on agricultural sector output in Nigeria. It, also, found that, on the effects of capital market performance on industrial sector output, MCAP and NOD exerted significantly positive long-run effects on industrial output in Nigeria. It, further, found that, on the effects of capital market performance on construction sector output, only MCAP exerted significantly positive long-run effects on construction sector output in Nigeria. Moreover, it found that, on the effects of capital market performance on trade sector output, only MCAP exerted significantly positive long-run effects on trade sector output in Nigeria while ASI, VTRAN and NOD exerted insignificantly positive long-run effects on it. Lastly, it found that, on the effects of capital market performance on service sector output, none of the capital market performance indicators exerted significantly positive long-run effects on service sector output in Nigeria. The study concluded that, capital market performance exerts heterogeneous long-run effects on sectoral output. It was, therefore, recommended that, government, at all levels, should focus more on agricultural development initiatives and strategies, as the sector manifests high tendency to respond significantly positively to capital market incitements in the long-run, much more that the sector is the largest employer of labour in Nigeria. Also, more government efforts, resources and attention should be geared toward the upgrading of market infrastructure, and toward the sanitization of Nigeria’s capital market against market infractions and insider abuses so as to boost the efficiency and liquidity performance of the market so that its effects can be noticeably felt on the industrial, construction, trade and service sectors of the economy.