THE EFFECT OF CAPITAL MARKET ON ECONOMIC GROWTH IN NIGERIA

The study empirically examines the Effect of Capital Market on Economic Growth in Nigeria using secondary time series data (1985 - 2023) on variables Gross Domestic Product (GDP) as dependent variable, while independent variables are market capitalization (MCAP), Labor force (LABF), Gross Fixed Capital Formation (GFCF) for the study analysis. The data was obtained from CBN statistical bulletin, National Bureau of Statistics NBS of various issues and world development indicators. The study adopted ARDL econometric model for the analysis after determining the order of the variables used, using ADF and KPSS for unit root test and ARDL bound test to determine the long run relationship among the variables. The result of the study shows that the p-values all exceeded the critical 0.05 value at 5% significance level which suggests the rejection of the null hypothesis for the respective diagnostic test. The unit root test for all the variables showed that they all achieved stationary at level except gross fixed capital formation and the co-integration result confirmed the presence of a long run relationship between the variables. The finding reveals that a long run coefficient of LMCAP is statistically significant at 1% level of significance. This implies that a 1% increase in Gross Market Capitalization will bring about 101% increase in GDP, all other factors remain constant. More so, LGFCF another explanatory variable that exert greater influence on GDP in Nigeria. According to long run estimates above, the coefficient of LGFCF is negatively related to GDP and statistically significant at 10% in long run. This implies that a 1% increase in LGFCF will result to a decrease in GDP rate. the research evidence have shown mixed findings for several economies, with regards to the Nigerian capital market, a key challenge is the loss of investor confidence in the system resulting from the unbridled corporate malfeasance on both the capital market operators, management and quoted companies. There is a need to take steps in restoring this declining confidence in the market. Keywords: Gross Domestic Product, Money Supply (LM2), Interest Rate, and Autoregressive Distributed Model (ARDL).