The Effect of Stock Market Behaviour on Economic Performance in Nigeria 2000-2022
CHAPTER ONE
Objectives of the Study
The general or broad objective of this study was to analyze the correlation between the stock market performance and economic growth in Nigeria. From the above mentioned broad objective, the specific objectives are as follows:
- To determine the nature of the relationship between Market Capitalization and Economic Growth in Nigeria.
- To examine the nature of relationship between All Share Index and Economic Growth in Nigeria.
- To ascertain the nature of relationship between Value of Transactions and economic growth in Nigeria.
- To evaluate the nature and extent of influence of Total New Issue on Economic Growth in Nigeria.
CHAPTER TWO
LITERATURE REVIEW
Introduction
This chapter will be discussing the relevant literature connected with the stock market performance and economic growth in Nigeria. This part of the study accounts the works that has been published or unpublished on this topic by different scholars and researchers. All these would allow the readers to map the field and position of the researcher within the context. Moreover, this part justifies or shows the reason for research. One can identify the noticeable gap, which the research could fill. The chapter is divided into four part, introduction, conceptual issues, review of empirical studies and theoretical framework.
Conceptual issues will discuss the key concepts that are involved, different definition from different scholars, and what is common in the definition, and my opinion concerning the concept. The review of empirical studies will then follow up, and in this part readers of this research work will be acquaint with knowledge of stock market from different scholar and researchers and the problem they investigated and the method use in gathering their data’s. Lastly theoretical framework will be last part of this chapter and it will be examining relationship between variable, the theories that are involve, and how such theories relate to this research.
Conceptual Issues
The Concept of Stock Market
Capital market is defined as the market where medium to long-term finance can be raised (Akingbohungbe, 1996). In another view, Ekezie (2002) noted that capital market is the market for dealings (i.e. lending and borrowing) in longer-term loanable funds. Mbat (2001) described it as a forum through which long-term funds are made available by the surplus to the deficit economic units. Capital market is a collection of financial institutions set up for the granting of medium and long term loans. It is a market for government securities, for corporate bonds, for the mobilization and utilization of long-term funds for development (Osinubi 2006). In this market, lenders (investors) provide long term funds in exchange for long term financial assets offered by borrowers. Aderibigbe (1977) said capital market could be defined narrowly as the market for dealings (Lending and borrowing) in longer-term loan able funds and equity shares. The market according to him is made up of the primary and secondary markets. The primary (new issue) market is concerned with raising new capital. The secondary market is the market for the sale and purchase of existing securities which are already in people’s hand, enabling savers who purchased bonds and shares when they had surplus funds to recover their money when they need cash.
Nwankwo (1980) opined that the central task of the capital market is the mobilization of funds in the hands of myriad individual who save and the pooling and channeling of such funds into productive uses. It is the most important institution for massive capital formation geared towards economic development. This market embraces both the new issues (primary) market and secondary market. Thus, it is a mechanism whereby economic unit desirous to invest their surplus funds, interact directly or through financial intermediaries with those who wish to procure funds for their businesses. In another sense, a stock market or equity market is a public market (a loose network of economic transactions, not a physical facility or discrete entity) for the trading of company stock (shares) and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together.
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
This chapter highlights the research methodology and procedures adopted for the research and consists of the following subsections; research design, method of data collection, method of data analysis and the variables of the study.
Research Design
The research design used in this study is descriptive design. Descriptive research designs help provide answers to the questions of who, what, when, where, and how associated with a particular research problem; a descriptive study cannot conclusively ascertain answers to why. Descriptive research is used to obtain information concerning the current status of the phenomena and to describe “what exists” with respect to variables or conditions in a situation (Barde 2013). The descriptive research attempts to describe, explain and interpret conditions of the present i.e. “what is’. The purpose of a descriptive research is to examine a phenomenon that is occurring at a specific place(s) and time. A descriptive research is concerned with conditions, practices, structures, differences or relationships that exist, opinions held processes that are going on or trends that are evident. Descriptive design is useful to this study because we are trying to examine the relationship between variable i.e. (stock market performance and economic growth). And lastly the objectives of the study necessitate the use of descriptive design.
Sources and Method of Data Collection
The data for this study was obtained mainly from secondary sources. Particularly from Central Bank of Nigeria (CBN) statistical Bulletins for the performance of the stock market from 2000 – 2022, Journal from library for the documented work done by the scholars for literature review, Nigerian Stock Exchange (NSE) fact books is used to obtain the volume of transactions, and E-Journal from internet for scholars outside Nigeria.
CHAPTER FOUR
DATA ANALYSIS AND DISCUSSION OF RESULTS
Introduction
This chapter discusses the organization, presentation and analysis of data collected from the secondary sources. The study uses descriptive statistics to describe the mean, standard deviation, maximum and minimum values of the variables. Pearson’s correlation co-efficient is used to explain the strength and direction of the relationship between the dependent variable and independent variables. Multiple regression analysis is adopted to determine the nature of the relationship between the dependent and independent variables. Statistical package for social science (SPSS) version 17.0 is used in order to arrive at reasonable interpretation of the analyzed data and hypotheses tested.
Table 4.1 provides a summary of the descriptive statistics and correlation result of both the dependent and independent variables. The descriptive statistics shows the mean scores and standard deviation of the variables of the study. The correlation result show the direction and strength of the relationship between the dependent and the independent variables considered in the model. A positive sign indicates a positive relationship between the variables.
The result from the descriptive statistics shows that on average, GDP for the whole period (2000-2022) stood at 20.85% and indicate a standard deviation of 13.20%.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
Summary
The aim of this study is to examine the impact of Stock Market Performance on Economic Growth in Nigeria so as to fill the large gap on the subject matter. The study makes its modest contribution to existing literature by revealing some facts on stock market and its impacts on economic growth in Nigeria. The study covers the period of 20 years (2000-2022).
Attention was focused on reviewing literature of previous researchers and related theories to this study. Majority of the studies reviewed empirically established the existence of positive relationship between stock market and economic growth.
The study adopts a descriptive research design. Non-survey method of data collection is employed. Descriptive statistics, Pearson’s correlation co-efficient and regression analysis are chosen as techniques of data analysis because they are consistent with nature of the study. The dependent variable is Economic Growth proxied by Gross Domestic Product and the independent variable is stock market represented by Market Capitalization, All Share Index, Value of Transaction, and Total New Issue.
On the basis of data collected and analyzed, the following are the major findings of the study;
- Stock Market Capitalization is positively related to the Gross Domestic Product. This means that an increase in Stock Market Capitalization leads to an increase in Gross Domestic Product and vice versa.
- All Share Index shows a positive relationship with Gross Domestic Product. This result indicates that an increase in All Share Index will result in increase in Gross Domestic Product and vice versa.
- The Value of Transactions has an insignificant negative relationship with Gross Domestic Product have a negative relationship. This finding proves that a decrease in the Value of Transactions will also lead to decrease in Gross Domestic Product and vice versa.
- Total New Issues are positively related to the Gross Domestic Product. This means that an increase in total new issues leads to an increase in Gross Domestic Product and vice versa.
Conclusion
Following the above findings, the study has reached the following conclusions:
- The existence of positive association between Market Capitalization and Gross Domestic Product implies that Market Capitalization leads to an increase in Gross Domestic Product. Thus, market capitalization significantly drives economic growth in Nigeria.
- All Share Index shows a positive relationship with Gross Domestic Product. Therefore it can be concluded that All Share Index results in increase in Gross Domestic Product and vice versa.
- Value of Transactions is negatively related to the gross domestic product. Therefore it can be concluded that an increase in Value of Transactions will result in increase in economic growth in Nigeria. Consequently, enhancing investor’s value can increase gross domestic product.
- The positive relationship between Total New Issues and Gross Domestic Product, This implies that an increase in total new issues leads to an increase in Gross Domestic Product. Thus, Total New Issue significantly enhances economic growth in Nigeria.
Recommendations
The findings from this study raise some policy issues and recommendations, which will reinforce the link between the stock market and economic growth in Nigeria.
- The demand for the services of the stock market is a derived demand. With the existence of a positive relationship between stock market capitalization and economic growth, it is pertinent to recommend that there should be sustained effort to stimulate productivity in both the public and private sectors.
- The negative and insignificant relationship between value of transaction and economic growth reflect the fact that majority of investors prefer to invest in other sector of the economy other than the capital market, the government should put up measures to stem up investors’ confidence and activities in the market and more foreign investors should be encouraged to participate in the market for improvement in the declining market capitalization so that it could contribute significantly to the Nigerian economic growth.
- Given that the stock market operate in a macroeconomic environment, it is therefore necessary that the environment must be an enabling one in order to realize its full potentials.
REFERENCES
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