Financial Market Operations and Economic Growth of Nigeria: An Empirical Insight

Abstract:

This paper investigated the efficacy of financial (money and capital) market operations on economic growth in Nigeria from 2008 to 2020. The study considered the post global financial crises periods. The regressor is financial market operations measured by market capitalization, All-share-index and turnover ratio, and the money market operations (most especially treasury bills, commercial papers, and bankers’ acceptance). Meanwhile, the regressand is economic growth measured by RGDP. Data for the study was sourced from the Central Bank of Nigeria (CBN) statistical bulletin (2020). Meanwhile, the study patterned after the ordinary least square (OLS) methodology using E-Views 9.0. The study reported that both market capitalization (MCA) and treasury bills (TBL) had a positive significant effect on the growth of the Nigerian economy. However, both All-share-index (ASI) and Bankers’ Acceptance (BAA) had adverse significant effects on the growth of the Nigerian economy. Meanwhile, both commercial papers and turnover ratio had a positive insignificant effect on RGDP. Hence, the study concludes that market capitalization (MCA) and treasury bills (TBL) are instrumental to the growth of the Nigerian economy. As such, the capital market regulators should sustain the current market capitalization by encouraging more foreign investors to participate in the market, maintain state-of-the-art technology like electronic fund clearance, automated trading and settlement practices, and eliminate physical transfer of shares. Lastly, the current treasury bill rate should be sustained if the Nigerian economy must experience growth.