Contribution of capital market variables on capital formation in Nigeria

Abstract

The study is on the contribution of capital market variables on capital formation in Nigeria for the period 1991-2018. Three hypotheses are formulated in line with the objectives of the study. The study used gross fixed capital formation as proxy for capital formation and employed as the dependent variable; whereas, the explanatory variables include all share index (ASI), market capitalization (MCAP) and value traded (VST). Secondary data were collected from CBN statistical bulletin 2018 and the hypotheses were tested using Ordinary Least Square using multiple regression econometrics model. The study finds out that market capitalization has a positive significant impact on gross capital formation in Nigeria, value of share traded has a negative and insignificant impact on gross capital formation in Nigeria and all share index has a negative but significant impact on gross capital formation in Nigeria. The study concludes that capital market has significant impact on capital formation in the Nigerian economy. The study recommends that monetary authorities should put in proper measures that would regulate the value placed on the shares traded thereby encouraging both local and foreign investors to participate in the market and also device means to restore confidence in the market, particularly through ensuring transparency and fair trading and dealings in the stock market.