Examining the Indirect Impact of Share Markets on Economic Growth in Nigeria

Abstract

This study investigates the indirect impact of the Nigerian share market on the country's economic growth, focusing on the period from 2000 to 2024. While the relationship between capital markets and economic development has been widely studied, this paper specifically explores the nuanced and indirect channels through which the share market may influence economic growth, such as through investment confidence, capital accumulation, and macroeconomic stability. Utilizing time-series econometric techniques including the ARDL bounds testing approach, the study examines the long-run and short-run dynamics between key share market indicators—market capitalization (MCAP) and All Share Index (ASI)—and gross domestic product (GDP). The results indicate a significant long-run relationship, with market capitalization showing a stronger indirect influence on economic growth than the ASI. The study also incorporates CUSUM and CUSUMSQ stability tests to validate the model’s stability over time. Findings are consistent with recent empirical literature, suggesting that while the Nigerian stock market does not directly drive economic growth, it plays a critical supporting role in shaping macroeconomic outcomes. Policy recommendations include strengthening regulatory frameworks, increasing market transparency, and encouraging broader participation in the stock market to deepen its growth-enhancing potential.