ASSESSMENT OF THE PERFORMANCE OF THE CAPITAL MARKET IN A DEREGULATED ECONOMY, THE NIGERIA EXPERIENCE 1986-2006

ASSESSMENT OF THE PERFORMANCE OF THE CAPITAL MARKET IN A DEREGULATED ECONOMY, THE NIGERIA EXPERIENCE 1986-2006

ABSTRACT

This study is an assessment of the performance of the capital market in the deregulated Nigerian economy from 1986-2006. The research focus was directed  toward a deeper understanding of how capital market performance has impacted on capital formation and economic growth in Nigeria. We concentrated on two capital performance indications namely; market capitalization and growth in the number of listed securities. Secondary data from Central Bank of Nigeria (CBN), Nigeria Stock Exchange (NSE), and Federal Office of Statistics (FOS), which were obtained through library research of relevant publications, were used. The econometric technique of multiple regression analysis was used as the main estimation tool to measure the degree of relationship between capital formation and Nigeria’s economic growth respectively and capital market performance measures. The study was guided by two hypotheses. Both linear and log linear specifications of each of the relationships were tried. Our hypotheses were tested with the R2 test and f-test. The major findings of the study were: that the log linear specifications suit our data more in terms of goodness of fit, precision of the estimates and tolerable level of multi collinearity and that capital market performance has both significant and positive impact on capital formation and economic growth in the deregulated Nigerian economy. The study concluded that to increase the level of capital formation in Nigeria and enhance economic growth of the country, efforts should be made to enhance the performance of the capital market but how fast the market moves to assume its rightful position as a major channel of capital formation needed for Nigeria’ rapid economic growth will depend on how fast the major obstacles impeding its performance are dispensed with. It recommended some measures to be implemented to enhance the performance of the Nigeria capital market. Like The regulatory and supervisory framework needs to be continuously reviewed and strengthened to embrace the activities of the market, emphasis on transparency and accountability on all aspects of economic management and corporate governance, etc.