STOCK MARKET PERFORMANCE AND NIGERIAN ECONOMIC GROWTH

Abstract

Despite its status as Africa's largest economy, Nigeria faces persistent challenges of growth without development, highlighting the limitations of its oil-dependent economic structure. To identify a viable pathway for diversification, this research assesses the precise effect of stock market performance, measured through market capitalization, the All-Share Index, and the value traded ratio, on the nation's economic growth (GDP). The study used yearly aggregate data from 1994 to 2023, obtained from Central Bank of Nigeria (CBN) Statistical Bulletin and World Bank Indicators. Multiple regression analysis, descriptive statistics, and correlation tests were employed to evaluate the impact of the selected stock market variables on GDP. The findings showed that market capitalization had a significant positive effect on GDP (p-value = 0.000), indicating that increases in the value of listed companies contributed meaningfully to Nigeria’s economic growth. However, the all share index (p-value = 0.4557) and value traded ratio (p-value = 0.1468) had no significant effect on GDP, suggesting that stock price movements and trading liquidity did not translate into substantial real sector growth. These results pointed to structural inefficiencies within Nigeria’s stock market that limited its capacity to drive sustainable economic expansion. The study concluded that market capitalization was the most relevant stock market variable influencing economic growth, while speculative indices and liquidity measures contributed little. It recommended policies to strengthen market capitalization through firm growth and new listings, improve market efficiency, and foster stronger linkages between stock market activities and the real economy to promote long-term development.