Econometrics Analysis of Impact of Capital Market on Economic Growth in Nigeria (1971-2010)

The stock market is a common feature of a modern economy and it is reputed to perform some necessary functions, which promote the growth and development of the economy. This study examines whether or not stock market promotes economic growth in Nigeria. To achieve this objective, ordinary least square regression (OLS) was employed using the data from 1971-2010. The result indicated that there is a positive relationship between economic growth and all the stock market development variables used. With 97% R-squared and 95% adjusted R-squared, the result showed that economic growth in Nigeria is adequately explained by the model for the period between 1971 and 2010.By implication 95% of the variation in the growth of economic activities is explained by the independent variables. The result of the study, which established positive links between the stock market and economic growth, suggests the pursuit of policies geared towards rapid development of the stock market. Also, all sectors of the economy should act in a collaborative manner such that the optimum benefits of linkages between the stock market and economic growth can be realized in Nigeria.