Stock Market Development and Long-Run Growth in Nigeria

This article was downloaded by: [ECU Libraries]On: 24 June 2014, At: 04:34Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH,UK

Journal of African BusinessPublication details, including instructions forauthors and subscription information:http://www.tandfonline.com/loi/wjab20

Stock Market Development andLong-Run Growth in NigeriaTokunbo Simbowale Osinubi a & Lloyd AhamefuleAmaghionyeodiwe aa Department of Economics, Faculty of the SocialSciences , University of Ibadan , Ibadan, NigeriaPublished online: 23 Sep 2008.

To cite this article: Tokunbo Simbowale Osinubi & Lloyd Ahamefule Amaghionyeodiwe(2003) Stock Market Development and Long-Run Growth in Nigeria, Journal of AfricanBusiness, 4:3, 103-129, DOI: 10.1300/J156v04n03_06

To link to this article: http://dx.doi.org/10.1300/J156v04n03_06

PLEASE SCROLL DOWN FOR ARTICLE

Taylor & Francis makes every effort to ensure the accuracy of all theinformation (the “Content”) contained in the publications on our platform.However, Taylor & Francis, our agents, and our licensors make norepresentations or warranties whatsoever as to the accuracy, completeness,or suitability for any purpose of the Content. Any opinions and viewsexpressed in this publication are the opinions and views of the authors, andare not the views of or endorsed by Taylor & Francis. The accuracy of theContent should not be relied upon and should be independently verified withprimary sources of information. Taylor and Francis shall not be liable for anylosses, actions, claims, proceedings, demands, costs, expenses, damages,and other liabilities whatsoever or howsoever caused arising directly orindirectly in connection with, in relation to or arising out of the use of theContent.

This article may be used for research, teaching, and private study purposes.Any substantial or systematic reproduction, redistribution, reselling, loan,

http://www.tandfonline.com/loi/wjab20

http://www.tandfonline.com/action/showCitFormats?doi=10.1300/J156v04n03_06

http://dx.doi.org/10.1300/J156v04n03_06

sub-licensing, systematic supply, or distribution in any form to anyone isexpressly forbidden. Terms & Conditions of access and use can be found athttp://www.tandfonline.com/page/terms-and-conditions

Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

http://www.tandfonline.com/page/terms-and-conditions

Stock Market Developmentand Long-Run Growth in Nigeria

Tokunbo Simbowale OsinubiLloyd Ahamefule Amaghionyeodiwe

ABSTRACT. The study empirically assessed the relationship betweenstock market development and long-run economic growth in Nigeria forthe period 1980 to 2000. The study used secondary data while four mod-els of multiple regressions were specified. The regression results, whichwere obtained using the Ordinary Least Square (OLS), show that mea-sures of stock market development statistically have no significant effecton economic growth in Nigeria during the period 1980 to 2000. The ma-jor implication of the findings is that if the Nigerian Stock Market is tosignificantly contribute to rapid economic growth, policies must be fash-ioned out to eliminate those factors that blur the effectiveness of the ve-hicle or transmission mechanism through which stock market activitiesinfluence economic growth.

Based on the findings, it was recommended that there should be an im-provement in the attractiveness of the market as a major source of raisingcapital. This will entail improvement in the physical infrastructure, moreefficient share transfer and delivering system and provision of adequateand timely information on the market. Also, there should be improvementin the institutional regulation, environment and legal framework suchthat a balance is maintained between the soundness and safety of themarket. And finally, there is the need to internationalize the stock marketto improve the flow of savings. This will give the market the advantages

Tokunbo Simbowale Osinubi (E-mail: [email protected]) and LloydAhamefule Amaghionyeodiwe (E-mail: [email protected]) are DoctoralCandidates and Research/Teaching Assistants, Department of Economics, Faculty ofthe Social Sciences, University of Ibadan, Ibadan, Nigeria.

Journal of African Business, Vol. 4(3) 2003http://www.haworthpress.com/store/product.asp?sku=J156

2003 by The Haworth Press, Inc. All rights reserved.10.1300/J156v04n03_06 103

Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

of risk diversification, improve information flow and encourage corpo-rate control through investment in equity. [Article copies available for afee from The Haworth Document Delivery Service: 1-800-HAWORTH. E-mailaddress: <[email protected]> Website: <http://www.HaworthPress.com> © 2003 by The Haworth Press, Inc. All rights reserved.]

KEYWORDS. Nigeria, stock market, development, economic growth,investment, equity

INTRODUCTION

The securities industry today is characterised by rapid growth andfilled with complexities. New instruments such as equity options, stockindex futures and a host of other derivatives are being traded throughoutthe world. The core of all these activities is the stock exchange and itscentral objective remains the maintenance of an efficient market andhence, long-run economic growth (Alile, 1997).

Developing countries stock markets compose a disproportionatelylarge amount of this growth. Over the past 10 years, World Stock Mar-ket capitalization rose from $4.7 trillion to $15.2 trillion, and emergingmarket capitalization jumped from less than 4 per cent to almost 13 percent of total world capitalization. Similarly, over this decade, the trad-ing of shares on emerging stock markets rose from less than 3 per cent to17 per cent of the total value of transactions on the world’s stock ex-changes. Furthermore, emerging markets have become more integratedwith world capital markets during the past 7 years. The blossoming ofemerging stock markets has attracted the attention of international in-vestors (Korajczyk, 1996). Portfolio equity flows to emerging marketsjumped from $150 million in 1984 to over $39 billion in 1995. Yet,there exists very little empirical evidence on the relationship betweenstock market development and long-run economic growth.

For growth to occur, a country may invest to build up productive ca-pacity. It is this capacity that determines the level of output of goods andservices in the economy. If investment, which represents the net in-crease in an economy’s capital stock, leads to growth, this then impliesthat there is a relationship between capital accumulation and economicgrowth. When sustained growth occurs, it is expected that over time,with appropriate policies that allow for more equitable distribution ofthe fruits of economic growth among progressively larger percentage of

104 JOURNAL OF AFRICAN BUSINESS

Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

the population, economic development would follow. Thus, the factthat capital, as generated from the stock market is needed for economicgrowth is not disputable (Soyode, 1990).

However, the fact remains that capital is indispensable for economicgrowth. As such, the sources, direction of flow, cost of capital as well asthe mechanisms for its mobilization and efficient utilization are issues,which should be of concern to an economy that seeks higher growth rateand development (Soyode, 1990). Theory also has it that the stock mar-ket provides services that boost economic growth. Large stock marketscan lower the cost of mobilizing savings and thereby facilitate invest-ment in the most productive technologies. Also, stock market liquidity,that is, the ability to trade equity easily is important for growth.

Under a free enterprise system, which is operated in Nigeria, thestock exchange is an important part in the economic life of the nation.Through its function, the stock exchange enables governments and in-dustry to raise long-term capital to finance development projects andfor expansion and modernization of industrial/commercial concerns.

An efficient stock market mobilizes savings and allocates a greaterproportion to those companies with the highest prospective rates of re-turns after giving due allowance to risk. This allocative function is criti-cal in determining the overall growth of the economy (Alile, 1997). Ifcapital resources are not provided to those economic areas especiallyindustries, where demand is growing and which are capable of increas-ing production and productivity, then the rate of expansion of the econ-omy will inevitably suffer.

However, it must be emphasized that the capacity to generatelong-term capital does not emerge spontaneously. Potentially usefulstock exchanges take time to nurture. The development of stock mar-kets require not just establishing the right legal and regulatory frame-work, but it is also associated with the building of an enterprising andflourishing private sector as well as political stability. It also demandseffective monetary and fiscal policy management, and indeed a stablemacroeconomic environment–and, by extension, the efficiency of capi-tal formation in the economy. Thus, the availability of a secondary mar-ket engenders capital formation and socio-economic development inthe long-run (Alile, 1997).

The above raises some important questions; whether stock marketdevelopment is important for economic growth and how the country hasbeen coping in mobilizing its economic surplus and allocating capitalfunds for economic development. Is it true that larger, more efficientstock markets boost economic growth? Is the stock market in Nigeria

Tokunbo Simbowale Osinubi and Lloyd Ahamefule Amaghionyeodiwe 105

Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

merely burgeoning casino where more and more players are coming toplace bets or is it importantly linked to economic growth? This papertherefore seeks to address these questions using available data from1980 to 2000.

Closely following this introductory section is section two whichbriefly reviews the recent performance of the Nigerian stock market.Section three outlines the theoretical literature on the functioning ofstock market and economic growth while section four contains the em-pirical analysis. Section five concludes the paper.

BRIEF REVIEW OF THE NIGERIAN STOCK MARKET

Capital is required for economic growth. It is not usually true thatcountries with large capital stocks are necessarily most developed. Themain source of capital is domestic savings as well as foreign savings.All these can be efficiently mobilized through a well-functioning capi-tal market that commands the confidence of both domestic and foreigninvestors. It is on this score that the capital market has a tremendous roleto play in the growth and development of an economy (Soyode, 1990).

The capital market, as we may recall, is the complex of institutionsand mechanisms through which long term funds are mobilized and uti-lized for development purposes. In the light of this, an efficient capitalmarket comprising the primary market and the stock market has a cata-lytic impact on growth in market-oriented economies (Obadan, 1998).

The existence of Nigerian capital market could be traced to 1946,when the Ten-year Development Plan (1946-55) local loan ordinancewas promulgated. The ordinance provided for the floatation of £300,000local loan stock bearing interest at 3.25 per cent for a tenor of 10-15years, the issue of which was oversubscribed by more than £500,000(Alile and Anao, 1986).

Before 1961, almost all formal savings and deposits went through thebanking system while major capital balances were invested for thecountry by the then-colonial masters on the London Stock Exchange.

However, following the establishment of the Central Bank of Nigeriain 1959 and the consequent report of the Barback Committee, it waslogical to have a stock exchange; hence the incorporation of the then-Lagos Stock Exchange in 1960 and supported by LSE Act of 1961. Butthe basic institutional framework for the operations of a capital marketdid not exist prior to the establishment of the Lagos Stock Exchange,which became the Nigerian Stock Exchange in 1977. To further the re-


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

view, the number of listed equity securities on the Nigerian Stock Ex-change had increased from 3 in 1961 to 90 in 1980 (Soyode, 1990). By1996, the total securities had grown to 276, the breakdown of whichcomprises of 24 government Stocks, 69 industrial and bonds and 183equities including Second-tier Securities Market (SSM) equities intro-duced in 1986 (Adeyemi, 1998).

Contributions of the Stock Market to the Nigerian Economy

The existence of the Nigerian Stock Exchange has entailed a numberof benefits for the Nigerian economy. These benefits are in line with thegeneral role of stock markets in the development process (Claessensand Glen, 1995). First, the stock market has been a source of capital forthe corporate sector. With current market capitalization of about US $4billion the market stands out as a viable mechanism for resource mobili-zation. For ten years up to the end of 1996, companies from the stockmarket raised a cumulative total of N32 billion. In 1996, the value ofnew issues amounted to N5.8 billion a significant part of which was for-eign portfolio investment (Emenuga, 1998).

The mere presence of a stock market in the country adds to boost theinternational investment climate of the country as it raises the chancesof additional local financing for both foreign and local direct invest-ment. In an economy like Nigeria’s, where the banking sector is battlingwith credibility problem following the systematic distress of the finan-cial sector, the stock market plays a morale-boosting role to investors. Itcan only be imagined what the private investment in the real sectorwould have been if the stock market has not been in place.

Second, the stock market provides opportunity for investment diver-sification. In the absence of the stock market, a large part of the wealthcurrently invested in the Nigerian Stock Market (about US$4 billion)would have been diverted to foreign countries. The market further re-mains a viable institution for holding back capital flight, which, hasbeen one of the causes of the country’s economic underdevelopment.

A third major role of the stock market relates to the privatization ex-ercise. Privatization of public enterprises, a cardinal point of the Struc-tural Adjustment Programmes in many developing countries aims atreducing the size of the public sector and correspondingly increasingprivate sector activities in the economies. The successful implementa-tion of the divestiture programmes offers a unique opportunity to under-score the importance of the stock market. The market has played an


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

unrivaled role in the implementation of the past privatization, as it didduring the implementation of the indigenisation programmes.

Between 1988 and 1992, 35 enterprises were privatized through pub-lic offer of shares. The offers totaled 1.2 billion shares valued at N1.5billion. This represented 5% of the market capitalization in 1992. To thegeneral public, the exercise created awareness of the investment oppor-tunity in the capital market, attracting 0.8 million new shareholders, andhence raising the number of shareholders by 200% (Emenuga, 1996).

The gains to the economy in terms of efficient operation of the privat-ized enterprises and relief to government of budgetary subvention to thefirms are some of the contributions of the exchange to the economy.Furthermore, the stock exchange enabled mass participation in the pri-vatization exercise and thus ensured that large number of Nigeriansbenefited from ownership of the divested assets than would have everbeen achieved if the stock market never existed. It should be noted thateven without economic growth, wider spread wealth distribution as theexercise ensured is a desirable end in the quest for economic develop-ment. In other words, in the absence of a stock market, the sale of publicwealth through privatization would have benefited a few rich persons,thereby worsening income inequality (Emenuga, 1998).

Noting the generally low contribution of the financial sector to Nige-ria’s GDP, an expectation of one to one correspondence of regressioncoefficients in relating the stock market to economic growth may be ap-propriate in assessing the role of the exchange in the economy.

Nigerian Stock Market and Policy Changes

Liberalization has been defined as the dismantling of regulations,which hinder the efficiency, dynamism, and competitiveness of mar-kets; it is the removal of financial repression, which in the context of theNigerian Capital Market was characterized by policies that distortedand stunted the market (Gautier, 1990).

Liberalization is an imperative for internationalization, which is theopening up of markets to foreign participation (Ogiri, 1996). Accordingto Soyode (1990), liberalization also encourages the internationaliza-tion of the capital market and this induces the flow of savings from for-eign portfolio investors.

On the other hand, internationalization is part of the efforts at removalof various elements of financial repression, which have hampered capitalinflow into Nigeria. Before 1997, the impediments included legal restric-tions on participation by foreign investors and operators, low rates of re-


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

turns, operational barriers such as price determination by Securities andExchange Commission, restrictions on free trading of securities, etc.(Odoko, 1998).

It was therefore a commendable development when in 1995 the Ni-gerian Government promulgated the Foreign Exchange (Monitoringand Miscellaneous Provisions) Decree No. 17 of 1995 and the NigerianInvestment Promotion Decree No. 16 of 1995 in replacement of the Ex-change Control Act 1962 and the Nigerian Enterprises Promotion De-cree 1989. This move has effectively internationalized the NigerianCapital Market putting the market on the right pedestal as a channel forforeign capital inflow into the economy. From available evidence, thishas proved helpful in attracting foreign investment capitals to the coun-try. Between July 1995 and July 1996, a total of $6.0 million foreignportfolio was made in Nigeria through the Nigerian Stock Exchange(Alile, 1996).

Furthermore, the response of foreign investors to the changes in Ni-gerian Stock Exchange legal environment has remained positive. As atDecember, 1996, a total of US$32.99 million in new foreign portfolioinvestment has been made in some of NSE quoted companies (Dozie,1997).

Characteristics of the Nigerian Stock Market

There are three distinct ways to characterize stock market devel-opment. These are traditional characteristics, institutional character-istics and asset pricing characteristics (Demirguc-Kint and Levine,1993). Traditional characteristics measure the basic growth indicessuch as number of listed companies and market capitalization. Institu-tional characteristics encompass the regulatory and legal rules in themarket as well as its information disclosure and transparency require-ments, market barriers and trading costs. Asset pricing characteristicsrelate to efficiency of the market in pricing risk.

The Traditional characteristics include:

• Market Size: At about 185 quoted firms and US$4 billion capital-ization, the size of Nigerian Stock Exchange is unusually small byinternational standards. For instance, the South African market has640 listed companies while in South Korea, there are 693 listedcompanies. In part, the dearth of quoted companies in Nigeria isexplained by the market’s recent origin. The Nigerian Stock Ex-change started operations in 1960. The phenomenon has tradition-


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

ally been explained in terms of aversion of indigenous entrepreneursto going public due to fear of losing control (Alile and Anao,1986). The weak private sector is thus a serious factor militatingagainst healthy growth of the stock market. The creation of a sec-ond-tier securities market to encourage the listing of indigenousfirms was a noble attempt to solve the problem. Privatization ofpublic enterprises is one opportunity for government to improvethe resource base of the stock exchange (Emenuga, 1998).

• Liquidity: The liquidity of a stock market relates to the ease withwhich shares are traded in the market. Liquidity is important for afew reasons. Generally, investors are levy of illiquid markets be-cause exit cannot be made at the desired time. The more liquid astock market is, the more it commands investors’ interest since re-sell of shares is easily guaranteed. Further, quoted firms have moreaccess to debt (debentures) and equity (new issues) in a liquid mar-ket. Also, in an economy with a liquid stock market, shares be-come easily acceptable as collateral for bank lending and this boostscredit and investment. At an average ratio of 2 per cent per annum(2.4% for 1996) the Nigerian stock market turnover ratio, a mea-sure of the value of shares traded relative to total market capital-ization is still low. The low trading activities in the Nigerianmarket results from the ownership structure, among other factors.Until recently, the market was restrictedly open to non-resident in-vestors (Emenuga, 1998).

The Institutional Characteristics include:

• Regulatory Institution: The purpose of regulating securities mar-kets is to ensure fair play and transparency in market operations. Inthe developed securities markets, the operating concept is positivesupervision, which, ensures that every market participant is treatedfairly and equally. The Nigerian Securities and Exchange Com-mission (NSEC) is a typically functional regulatory organ. Estab-lished in 1979 on the heels of complaints of inappropriate valuationof shares of public companies during the second leg of theindigenization programme, the activities of NSEC in the NigerianCapital Market include registration of securities, monitoring andsupervision of all activities in the market, registration (licensing)of market participants such as registrars, investment advisers and


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

dealers and, investigation of quoted companies to ensure compli-ance with approved practices and conduct.

• Transaction Costs: The cost of transaction is one of the barometersfor measuring the efficiency of a capital market. The major com-ponents of transaction costs facing an investor are, brokerage fee,stamp duty and in some countries an additional charge by the regu-latory authority. Nigeria has both brokerage fees and stamp duties.The brokerages are graduated from 2.75 per cent downwards. Inaddition to the brokerage fee and the stamp duty, the NSEC, theapex regulatory authority in the capital market has, since 1985charged a fee of 1 per cent on every transaction in securities (cur-rently levied only at the buyers).

• Openness and Market Barriers: From the inception of the NigerianStock Exchange till 1972 foreign investors had unrestricted accessto the capital market. By Indigenization Decree of 1972 (amendedand reinforced in 1977) government restricted the scope of foreigninvestment and limited the interest of foreigners to a maximum of40 per cent equity holding in a listed security. The indigenizationlegislations were amended in 1989 to accommodate larger foreignpresence in the capital market.

On July 15, 1995, the Federal Government of Nigeria promul-gated the Nigerian Investment Promotion Commission Decree(No. 16) whose thrust was to liberalize the investment climate inthe country. The decree established the Nigerian Investment Pro-motion Commission, a body charged with the responsibility forpromoting foreign and domestic investment in the country. A sisterlegislation, Foreign Exchange (Monitoring and Miscellaneous Pro-visions) Decree No. 17, (January 16, 1995) further eased the mech-anism for foreign investment flows. It repealed the ExchangeControl Act of 1962.

The Asset Pricing Characteristics include:

• Trading Rules and Asset Pricing: In the Nigerian Stock Market,trading is by the call-over system. By this trading rule, stocks arecalled up in turn during which brokers bid for or offer to sell anystock of interest. Trading time in the market is thus restricted abouttwo hours each day from Monday to Friday. In developed markets,stock trading is a continuous process throughout working hoursand prices can change several times in a day. In addition to the re-stricted trading period, price movements are officially controlled,


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

a 5 per cent fluctuation limit is still enforced. The rationale for thecontrolled price variation is to prevent speculation and ensure thatprices are driven by market fundamentals, in order to achieve ahealthy and orderly market development. The regulatory processmay explain the poor sensitivity of equity prices to macroeco-nomic conditions–exchange rate, interest rate, money supply, in-flation etc, (Emenuga, 1996), hence insufficient compensation inthe market for systematic risk.

BRIEF REVIEW OF THE LITERATURE

There is consensus of opinion that the nature and content of the netbenefits which a capital market offer a country should be judged by itseffect on the mobilization of savings (saving ratios), capital inflow andoutflow, the mobility of investible surplus funds, resource allocation,distribution of income and wealth, and responses to economic policies.Given that capital markets have a significant role to play in the growthand development process, then it is desirable that they should be al-lowed to function as effectively as possible (Soyode, 1990).

There are many studies on the development of capital markets butrelatively few of them linked capital market development with eco-nomic growth. In terms of theory, a growing literature argues that thefunctioning of stock markets may affect national saving rates, the allo-cation of those savings, firm financing decisions and economic growth.Greenwood and Smith (1996) show that large stock markets can lowerthe cost of mobilizing savings and thereby facilitate investment in themost productive technologies.

Bencivenga, Smith, and Starr (1996) and Levine (1991) argue thatmore liquid stock markets–markets where it is less expensive to tradeequities–reduce the disincentives to investing in long duration projectsbecause investors can easily sell their stake in the project if they needtheir savings before the project matures. Enhanced liquidity, therefore,facilitate investment in longer-run, higher-return projects that boosteconomic growth.

Specifically, although many profitable investments require a long-run commitment of capital, savers do not like to relinquish control oftheir savings for long periods. Liquid equity markets ease this tensionby providing an asset to savers that they can quickly and inexpensivelysell. Simultaneously, firms have permanent access to capital raisedthrough equity issues. Moreover, Kyle (1984) and Holmstrom and Tirole


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

(1993) argue that liquid stock markets can increase incentives to get in-formation about firms and improve corporate governance.

Devereux, Smith and Obstfeld (1994) showed that greater interna-tional risk-sharing through internationally integrated stock markets in-duces a portfolio high-return investments, thereby accelerating long-rungrowth. These liquidity and risk models, however, also imply thatgreater liquidity and international capital market integration ambigu-ously affect saving rates. In fact, saving rates could fall enough suchthat growth rates may actually slow with more liquidity and interna-tional integration.

Barry (1986) asserted that four countries in East and South Asia havecompiled remarkable records of economic developments. The coun-tries: Hong Kong, Korea, Singapore and Taiwan are known collectivelyas the “Four Little Tiger.” The success of these countries has been suchthat many countries have considered emulating their success. Barry at-tributed the remarkable records of economic development to develop-ments of the capital market, banking system and substantial liberalizationprogramme.

Robinson (1964) asserted that economic freedom leads to the devel-opment of markets. Consumers are free to buy the goods they want, theyseek the product they want in the market of their choice. The air of free-dom (with legal limits) is one of the most compelling reasons for inves-tors to hold idle funds or channel them to such centers or ventures,which they consider safest or more profitable as the stock market.

Soyode (1990) observed that the analytical framework of whichStructural Adjustment Programmes of the World Bank and the Interna-tional Monetary Fund have been drawn since the early 1980s, haveplaced tremendous emphasis on the role of investible resources in self-sustained growth process. Soyode (1991) also observed that the stockmarket is governed by generally economic and financial policy like anyother component of the financial system, it can fulfill the intended rolewith the context of adequate and responsive policies.

It is also in recognition of this fact that Jensen and Murphy (1990)stated that the condition of being developed consists of having accumu-lated and having established efficient social and economic mechanismsfor maintaining and increasing large stock of capital per head in variousforms. Thus, in the developed countries a large stock of capital beingused must be replaced, replenished and updated. Conversely, the condi-tion of being underdeveloped is characterized by the possession of rela-tively stocks of various kinds of capital. These must be continually


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

increased. A country’s capital stock would only contribute to economicgrowth if its investment were productive.

If investment, which represents the net increase in an economy’s cap-ital stock, leads to growth, according to Soyode (1990), then there is arelationship between capital accumulation and economic growth. Thus,the fact that capital is needed for economic growth is not disputable.

With respect to Korean Capital Market, Soyode (1990) asserted thatthe tremendously explosive development of the Capital Market in theRepublic of Korean could be attributed, in part, to persistent govern-ment nurturing of both the demand and the supply aspects of finance.The capital market aided growth by providing relatively long-term debtand equity finance for the government and the corporate sector. As theeconomy became more developed and complex, adequate regulationand supervision have now become increasingly important for financialand economic stability.

Ojo (1982) on the other hand, stressed government role on the devel-opment of the capital market. He opined that there should be flexibilityin the rules and regulations and those policy makers in Nigeria shouldguard against promotion of such financial structure and developmentthat merely facilitate the concentration of wealth and power unduly in afew families of entrepreneurs owning increasingly large conglomer-ates. Ojo (1982) stressed further the need to effect reforms of the vari-ous legislations on the capital market in order to ensure that ownership,control and trading in securities do not constitute a cog in the wheel ofeconomic development. Further to this, Soyode (1991) noted that thereare occasional specific interventions in the capital markets to increasethe market’s stability and improve the allocation of funds among sec-tors. Valid as the objectives are, there are certain methods of interven-tion which, though made necessary in the first instance by the markets’own imperfections, attract dysfunctional consequences to the effi-ciency, fluidity and general soundness of the market.

In making comparison with other stock markets in both developedand developing societies, Akinnifesi (1988) compared the NigerianStock Exchange with its counterpart in Hong Kong and Malaysia andenumerated the problems of Nigerian Stock Exchange which includedpaucity in equities listed, “buy and hold” attitude of investors, and thetotal absence of speculators in the securities market.

Gill (1982) compared Nigerian Stock Exchange with those of the de-veloped countries of USA, Canada and Japan and other developingcountries of Korea, Brazil and Jordan. He came to the conclusion that


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

rapid economic growth and conscious efforts to promote securities mar-ket development go hand-in-hand.

Given the level of development of the Korean Capital Market,Soyode (1990) said, it is obvious that the country is in a very good posi-tion to benefit from the flow of world surplus funds. Nigeria is clearlynot that fortunate in this respect. The situation we are faced with todaywith respect to the development of the Nigerian Capital Market is thatwhich follows the historical experience of the Republic of Korea. Whatthis suggests is that we cannot look forward to rapid development of theNigerian Capital Market without having achieved sustained economicgrowth, which must support its development. He goes on to say thatthere is a positive correlation between growth in capital market activi-ties and overall economic growth.

Achuka (1994) concluded that there had been institutional growth inthe Nigerian Capital Market and market indicators have shown im-proved performance over the years. The level of professionalism ofmarket operators has also improved. It should be borne in mind that theperformance of any capital market is dependent on a number of eco-nomic factors and/or political stability and all of which would impact onthese indicators. Finally, the level of market awareness has increasedremarkably as more Nigerians now show interest in the capital market.However, when compared with other emerging and matured markets,across the globe, there is plenty of room for improvement.

Role of Stock Markets in Economic Growth

Besides evaluating the general importance of the capital market, thisstudy provides empirical evidence regarding the growing debate con-cerning the specific role of stock markets in economic growth. A bur-geoning theoretical literature suggests that the functioning of equitymarkets affects liquidity, risk diversification, information acquisitionabout firms, corporate control and savings mobilization. By altering thequality of these services, the functioning of stock markets can alter therate of economic growth.

One-way stock markets may affect economic growth and activity isthrough their liquidity. Many high-return projects require a long-runcommitment of capital. Investors, however, are generally reluctant torelinquish control of their savings for long period. Without liquid mar-kets or other financial arrangements that promote liquidity, therefore,less investment may occur in the high-return projects. As shown by Le-vine (1991) and Bencivenga, Smith, Starr (1996), stock markets may


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

arise to provide liquidity: savers have liquid assets while firms havepermanent use of the capital raised by issuing equities.

Specifically, liquid stock markets reduce the downside risk and costsof investing in projects that do not pay off for a long time: with a liquidequity market, the initial investors do not lose access to their savings forthe duration of the investment project because they can quickly, cheaply,and confidently sell their stake in the company. Thus, more liquid stockmarkets ease investment in long run, potentially more profitable pro-jects, thereby improving the allocation of capital and enhancing pros-pects of long-run growth.

Risk diversification through internationally integrated stock marketsis a second vehicle through which stock market development may influ-ence economic growth. Saint-Paul (1992), Devereux and Smith (1994),and Obstfeld (1994) demonstrate that stock markets provide a vehiclefor diversifying risk. These models also show that greater risk diversifi-cation can influence growth by shifting investment into higher-returnprojects.

Intuitively, since high-expected-return projects also tend to be com-paratively risky, better risk diversification through internationally inte-grated stock markets will foster investment in higher return projects.Again, however, theory suggests circumstances when greater risk shar-ing slows growth. Devereux and Smith (1994) and Obstfeld (1994)show that reduced risk through internationally integrated stock marketcan depress savings rates, slow growth, and reduce economic welfare.

Stock markets may also promote the acquisition of information aboutfirms (Grossman and Stiglitz (1980), Kyle (1984), and Holmstrom andTirole (1993). Specifically in larger, more liquid markets, it will beeasier for an investor who has gotten information to trade at postedprices. This will enable the investor to make money before the informa-tion become widely available and prices change. The ability to profitfrom information will stimulate investors to research and monitor firms.Better information about firms will improve allocation and spur eco-nomic growth.

Opinions differ, however, over the importance of stock markets instimulating information acquisition. Stiglitz (1985, 1993), for example,argues that well-functioning stock markets quickly reveal informationthrough price changes. This quick public revelation will reduce–not en-hance–incentives for expending private resources to obtain informa-tion.

Stock market development may also influence corporate control. Di-amond and Verracchia (1982) and Jensen and Murphy (1990) show that


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

efficient stock market helps mitigate the principal–agent problem. Effi-cient stock markets make it easier to tie manager compensation to stockperformance. This helps align the interests of managers and owners.

Furthermore, takeover threats induce manager to maximize thefirm’s equity price. Thus, well-functioning stock markets that ease cor-porate takeovers can mitigate the principal-agent problem and promoteefficient resource allocation and growth. Stiglitz (1985) argues that out-siders will be reluctant to take-over firms because outsiders generallyhave worse information about firms than existing owners. Thus, hemaintained that the takeover threat would not be a useful mechanism forexerting corporate control; stock market development, therefore, willnot importantly improve corporate control.

Moreover, greater stock market development encourages more dif-fuse ownership and this diffusion of ownership impedes effective cor-porate governance. Finally, Summers and Heston (1988) note that bysimplifying takeovers, stock market development can stimulate wel-fare-reducing changes in ownership and management.

In terms of raising capital, Greenwood and Smith (1996) show thatlarge, liquid, and efficient stock markets can ease savings mobilization.By agglomerating savings, stock markets enlarge the set of feasible in-vestment projects. Since some worthy projects require large capital in-jections and some enjoy economies of scale, stock markets that easeresource mobilization can boost economic efficiency and accelerate long-run growth.

However, disagreement exists, over the importance of stock marketsfor raising capital. Mayer (1988), for example, argues that new equityissues account for a very small fraction of corporate investment.

All things considered, Soyode (1990) further argued that capital is in-dispensable for economic development. The main source of capital isdomestic savings as well as foreign savings. All these can be efficientlymobilized through a well functioning stock market.

Recent Performance of the Nigerian Stock Market

By certain measures, the Nigerian capital market is one of the mostdeveloped and attractive on the African continent and compares favor-ably with a few emerging markets outside the region. As of December,1996, the Nigerian Stock Exchange had on its trading board 276 securi-ties, of which 184 were equity listings, covering virtually every sectorof the economy, from manufacturing to aviation and banking to con-struction. The market also guides itself with some of the most reputable


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

and profitable companies in the country having strong links or subsidiaryrelationship with well-known multinational corporations (Akamiokhor,1996).

The fairly rapid growth in the Nigerian securities market and its im-pact on the investing public was not very much felt until the implemen-tation of the Nigerian Enterprises Promotion Decree of 1972 furtherstrengthened by that of 1977. Since then, the stock market has grownover the years (Soyode, 1990).

The number of quoted companies on the Nigerian Exchange (184 atthe end of 1996) surpassed equity listings on emerging markets such asPortugal (169), Poland (65), Jordan (97), Russia (170), Argentina (149)and Venezuela (90), and on mature markets like Austria (109), Belgium(143), Norway (151) and Finland (73). It was higher than all markets inAfrica with the exception of South Africa and Egypt. The point is that,the Nigerian market provides greater options to investors in terms ofchoice of equities than most other African markets do. Ghana, for in-stance, had only 19 companies listed, Botswana 12, Kenya 56, Tunisia26, Cote d’Ivoire 31 and Zimbabwe 64 in 1996, (Akamiokhor, 1996).

Evidently, the growth of equity listings on the Nigerian Stock Ex-change in the 1990s was as a result of a number of economic policies putin place in the last few years. The first major boost came in 1988 whenthe Federal Government embarked on the privatization of public enter-prises. This exercise, which brought 28 new companies to the Ex-change, resulted in an increase in the volume of shares traded in both theprimary and secondary markets.

Though the Federal Government has slowed down on its privatiza-tion programme since 1994, the capping of interest rates at 21 per centbetween 1994 and December 1996 provided further support for thegrowth of the Nigerian Stock Market. This interest rate cap in aninflationary environment lure investors away from the money market,in search of higher yielding investment opportunities on the Exchange(Atedo, 1996).

The introduction of stock market index by the Nigerian Stock Ex-change 1985 and the establishment of the Second-Tier Securities Marketin the same year to allow small and medium-sized enterprises greater ac-cess to the capital market are obviously significant developments (Soyode,1990).

The Exchange’s All Share Index closed at 5,092.1 by 1995-year end,up from 2,205 (131%) in 1994. This represents an increase of 92 per centin dollar terms. Between 1st January, 1996 and 31st December, 1996,


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

the index had grown to 6992.10, representing about 45 per cent (seeAtedo, 1996).

Equity market capitalization in local currency terms has witnessedtremendous growth over the last fifteen years. Total stock market capi-talization increased from N4.46 billion in 1980 to N12.848 billion in1989. This was over two-fold increase, (Soyode, 1990). Rising fromover N12 billion in 1990 to N66 billion in 1994 (408%) and further toN285.6 billion by December 1996 (325%). Between December 1995and December 1996, equity market capitalization of over N84.0 billion,or an average monthly increase of almost 10 billion.

In the last few years, equity market capitalization has accounted forover 95 per cent of the market value of all securities on the NigerianStock Exchange, a reversal of previous pattern when interest-bearingsecurities dominated the market (Akamiokhor, 1996).

The remarkable increase in market capitalization in local currencyterms is attributable to new listings and enhanced market prices of equi-ties. Unfortunately the improvement in market capitalization in localcurrency terms could not be matched in dollar terms as a consequenceof the depreciation of the Naira exchange rate. Thus, equity market cap-italization, which recorded a growth of over 1,000 per cent between1990 and 1995 in Naira terms, witnessed an increase of only 48.0 percent in dollar terms during the same period. By December 1996, Nigeriahad a market capitalization of over US$3.2 billion. However, if recentimprovement in the Naira exchange rate were sustained, the dollar valueof the market capitalization would equally improve and enhance the at-tractiveness of the domestic market (Akamiokhor, 1996).

MODEL SPECIFICATION

The model presented here is adapted from Levine and Zervos (1996)with modifications considering the economic and political economy pe-culiarities of the Nigerian economy for the period under study. Themodel is adapted because it serves as useful guide in assessing the per-formance and opportunities available in the national economy.

Generally, the structure of the multiple regression model equation forthis study is as follows:


(1)

Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

Where the Growth indicator, G(j), is either real GDP growth, grossfixed capital formation or national savings over the 1980-2000 period;the initial stock market indicator, S(k), is either the Market capitaliza-tion (MCAP), the total value traded (TVT), or the new issues (NI) mea-sured at the beginning of the same period; is the constant (intercept), �is the estimated coefficient on the initial stock market indicator and Ut isthe error term.

Specifically, the model is split into the following:

Relationship Between Real GDP Growth, Stock Market Size,Liquidity and New Issues

This is represented as:

where:

GDP = Growth Rate of the Gross Domestic ProductMCAP = Market CapitalizationTVT = Total value tradedNI = New IssuesUt = Stochastic Error term

Relationship Between GFCF and Stock Market Size, Liquidity,New Issues

This is specified as:

where

GFCF = Gross Fixed Capital FormationAll other variables remained as defined in equation 1

Relationship Between Saving and Stock Market Size, Liquidityand New Issues

This is also specified as:


(2)

(3)

(4)

Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

Where: Sav = National Savings

All other variables remained as defined in equation (2).The data on each of the economic variables used in all the equations

above are basically annual “actual” data. However, they are trans-formed into growth rates and ratios to enable us determine the trans-mission mechanisms through which stock market impact on economicgrowth.

Relationship Between Growth Rate of GDP and Stock Market Sizeand Liquidity Ratios

This is specified as:

where:

DGDP = Growth Rate of Gross Domestic Product (%)RMCAP = Market capitalization Ratio (%)RTOR = Turnover Ratio (%)RTVT = Value Traded Ratio (%)Ut = Stochastic Error Term

This paper does not have any apriori expectations about the relationbetween growth indicators and stock market measure because theorydoes not provide a unique concept or measure of stock market develop-ment. Theory only suggests that stock market size and liquidity “may”affect economic growth.

The data used in this study are mainly secondary data obtained fromsecondary sources. These sources are chosen because they are the mostauthentic sources of reliable data on the Nigerian Stock Market and theNigerian Economy. The sources are The Nigerian Stock Exchange, An-nual Report and Accounts, Securities and Exchange Commission, Factsand Figures on Nigerian Capital Market, Central Bank of Nigeria Statis-tical Bulletin and Central Bank of Nigeria’s Major Economic, Financialand Banking Indicators.

Definition of Variables

G(j): Growth indicator (it is either real GDP growth, gross fixed capitalformation or national savings)


(5)

Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

S(k): Initial stock market indicator (it is either the Market capitalization,MCAP, the total value traded, TVT, or the new issues, NI)GDP: Growth Rate of the Gross Domestic Product is a measure of Eco-nomic GrowthGFCF: Gross Fixed Capital Formation is a measure of EconomicGrowthSAV: National Savings is a measure of Economic GrowthDGDP: Growth Rate of Gross Domestic ProductMCAP: Market Capitalization is the total value of all listed shares onthe Nigerian’s stock marketTVT: Total value traded is total value of domestic share traded on theNigerian’s stock marketNI: New Issues is the sale of long-term securities either as stocks orbonds using the stock marketRMCAP: Market capitalization Ratio is the value of listed domesticshares divided by GDPRTOR: Turnover Ratio is the total value of domestic shares traded di-vided by market capitalizationRTVT: Value Traded Ratio is the total value of domestic shares tradedon the stock market divided by GDP: The constant (intercept)β: The estimated coefficient on the initial stock market indicatorUt: The error term.

Discussion of the Result

From equation 2, only NI is significant in explaining variations in theGDP. It shows a positive relationship between it and the GDP. The t-ra-tio (and probability) and the standard error estimates show the impor-tance of NI on GDP at 5% significant level. The result also shows thatthe MCAP has a negative relationship with the GDP but it is insignifi-cant given the value of the t-ratio and standard error estimates. For theTVT, it is positively related to GDP but the link is insignificant (See Ta-ble 1). However, the co-efficient of determination (R2) suggests that theregression line for equation 2 is a good fit showing that the total varia-tion of the GDP, which can be explained, by explanatory variables(MCAP, TVT and NI) is 55%. This implies that measures of stock mar-ket development are statistically significant in explaining variation inGDP. At 0.05 level, the relationship between measures of stock marketdevelopment and GDP remain statistically significant as confirmed by


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

the results of the F-statistic which also reinforces the believe that GDPis statistically related to the independent variables in the regressionequation 2.

Equation 3, on Table 2, showed that in terms of statistical significant,both MCAP and TVT are not significant at 5% though MCAP has a pos-itive relationship with GFCF. It is only NI that is statistically significantwith GFCF at 5% level with a t-ratio of 3.0819. The R2 value of 81% in-dicates that MCAP, TVT and NI can explain a large proportion of thetotal variation in GFCF. Also, the value of the F-statistic (at 0.05 level)shows that GFCF is statistically related to the independent variables(MCAP, TVT and NI).

In equation 4, there is a significant, positive relationship between NIand savings at 5% level, while the other stock market measures, i.e.,MCAP and TVT, show an insignificant, negative relationship at thesame level. Furthermore, both the coefficient of determination and theadjusted co-efficient of determination suggest that the total variation ofsavings which can be explained by the explanatory variables, i.e.,MCAP, TVT and NI are 38% and 23% respectively. The F-statisticsalso shows that savings is not significantly related to the independentvariables, see Table 3.

The result of equation 5, on Table 4 shows that there is no significantrelationship between the growth of GDP, i.e., DGDP, and ratios ofMCAP, TVT and TOR. At 0.05 level, the relationship between RMCAP,RTOR and RTVT, and growth rate of GDP (DGDP) remained statisti-cally insignificant as confirmed by the value of the t-statistics. Al-though, RMCAP and RTOR are insignificant and negatively related to


TABLE 1. Ordinary Least Squares Estimation (Dependent Variable: GDP).

REGRESSOR COEFFICIENTSTANDARD

ERROR T. RATIO (PROBABILITY)

CONSTANTMCAPTVTNI

71.1716�0.14924

8.74936.9787

6.98200.24155

20.88383.3459

10.1935 (0.000)�0.61787 (0.548)

0.41895 (0.683)2.0858 (0.059)*

R.2 0.55342R.2 adjusted 0.44177D.W. Statistic 1.4824F. Statistic F (3, 12) 4. 9569 (0.018)* Significant at 5% Level

Source; Computed from regression result

Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

the growth rate of GDP (DGDP), RTVT was positively related butweakly significant. The R2 shows that a large proportion of the totalvariation in the growth rate of GDP cannot be explained by ratios ofMCAP, TVT and TOR or that such variations are due largely to somerandom influences.

These results imply that measures of stock market development haveno varied significant effect on economic growth in Nigeria during theperiod under review.

Managerial Implications

The managerial implication of the findings is that if the NigerianStock Market is to significantly contribute to rapid economic growth,


TABLE 2. Ordinary Least Squares Estimation (Dependent Variable: GFCF).



CONSTANTMCAPTVTNI

7.49940.4673

�0.6995614.4353

9.77390.33813

29.23444.6838

0.76730 (0.458)0.0013821 (0.999)�0.02392 (0.981)

3.0819 (0.010)*

R2 0.81014R2 adjusted 0.76268D.W. Statistic 1.8702F. Statistic F (3, 12) 17.0683 (0.000)* Significant at 5% LevelSource; Computed from regression result

TABLE 3. Ordinary Least Squares Estimation (Dependent Variable: SAV).



CONSTANTMCAPTVTNI

23.0869�0.24088

�34.710818.2167

16.43200.56847

49.14937.8745

1.4050 (0.185)�0.42373(0.679)

�0.70623 (0.494)2.3134 (0.039)

R2 0.38742R2 adjusted 0.23427D.W. statistic 0.79071F. Statistic F (3, 12) 2.5298 (0.106)Significant Level 5%Source; Computed from regression result

Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

policies must be fashioned out to eliminate those factors that blur the ef-fectiveness of the vehicle or transmission mechanism through which stockmarket activities influence economic growth.

There is the need to formulate policies, which will encourage the useand improve the attractiveness of the stock market as a major source ofraising funds by both the private and the public sector. Attractiveness ofthe market to investors who are the sole providers of funds to the Nige-rian Stock Market is also a factor that should not be overlooked in pol-icy formulation. Such policy should strike a balance between marketfreedom and investor protection.

The findings also call for policies that will address the current stockmarket illiquidity caused by inadequate physical infrastructure andslow transfer and delivery system. There is the need to reform the exist-ing regulatory, supervisory and legal capabilities of the stock marketand participants to improve its efficiency.

CONCLUSION

The role and importance of stock market in economic growth cannotbe over-emphasized as a mechanism for the effective mobilization andefficient allocation of saving which is crucial for any economy that isdesirous of a rapid economic growth rate. Because of the low level ofdevelopment of the Nigerian financial system, reliance is placedheavily on the money market for raising capital for development. Thelack of effective utilization of the capital market becomes a cause forconcern.


TABLE 4. Ordinary Least Squares Estimation (Dependent Variable: DGDP).



CONSTANTRMCAPRTORRTVT

4.9081�11.7886

�1.15534.3826

6.230339.90181.4734

18.4228

0.78777 (0.446)�0.29544 (0.773)�0.78412 (0.448)0.237981 (0.816)

R2 0.174921R2 adjusted 0.15635D.W. Statistic 2.3334F. Statistic F (3, 12) 0.32395 (0.808)Significant Level 5%Source; Computed from regression result

Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

Based on the findings, it can be concluded that empirically a posi-tive relationship exist between Stock Market development and eco-nomic growth but this relationship is weak thereby rendering its effecton economics growth statistically insignificant. This gives empiricalrelevance to the sensitivity of stock market development to macroeco-nomic and sector policies and political stability. It also shows thatsuch development is dependent upon policies, which promote the effi-cient allocation of resources in accordance with market forces ratherthan government directives.

The unstable macroeconomic environment as reflected by high andrising inflation, exchange rate depreciation, negative real interest rates,insolvency of key financial institutions, high cost of financial servicesand limited range of financial markets which is a pre-condition for thesuccessful operation of a modern financial market.

This lack of confidence enabling environment is partly responsiblefor the slow development of the Nigerian Stock Market as with wit-nessed during this period relative to the development of other emergingstock markets. The slow development induced by unconducive en-abling environment limited the attractiveness of the stock market as averitable source of savings mobilization.

Based on these findings, we recommend the following that given thefact that a conducive, stable and unrestricted macroeconomic environ-ment is a sine qua non to stimulate entrepreneurial activity, which willginger demand for stock market, there should be a downward review ofcost associated with raising funds in the stock market and improvementin the procedures to drastically reduce the present long period taken toraise money in the market. This will improve the attractiveness of themarket as a major source of raising capital. Secondly, the liquidity ofthe market should be improved by facilitating easy entry and exit. Thiswill entail improvement in the physical infrastructure, more efficientshare transfer and delivering system and provision of adequate andtimely information on the market. Thirdly, all tax incentives that penal-ize returns on investment in the stock market must be removed.Fourthly, there should be improvement in the institutional regulation,environment and legal framework such that a balance is maintained be-tween the soundness and safety of the market. And finally, there is theneed to internationalize the stock market to improve the flow of savings.This will give the market the advantages of risk diversification, improveinformation flow and encourage corporate control through investmentin equity.


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

REFERENCES

Achuka, S.C. (1994): “The Growth and Development of the Nigerian Capital Market.”Paper presented to University of Ibadan, Dept. of Economics, pp. 114-116.

Adeyemi, K.S. (1998): “Options for Effective Development of the Nigerian CapitalMarket.” Paper delivered at National Seminar on the Capital Market and Nigeria’sEconomic Development, Organized by the Nigerian Economic Society, at Instituteof International Affairs, Lagos. 21st January pp. 1-19.

Akamiokhor, G.A. (1996): “The Role of Stockbrokers in Economic Development.”Paper delivered at the Annual Conference of Chartered Institute of Stockbrokers itGateway Hotel. Abeokuta, Ogun State. 1st November. pp. 1-15.

Akinnifesi, E.O. (1988). “The Role and Performance of the Nigerian Capital Market.”In A.O. Phillips and E.C. Ndekwu, Economic Policy and Development in Nigeria,Ibadan, Nigerian Institute of Social and Economic Research, NISER, pp. 81-112.

Alile, H. (1996): “Government Must Divest.” The Business Concord. 2nd December.pp. 8.

Alile, H. (1996): “Dismantling Barriers to Foreign Capital Inflows.” The BusinessTimes, 16th December. pp. 5.

Alile, H. (1997): “Improving Stock Market Awareness” The Business Times. 14thApril. pp. 5.

Alile, H. and Anao, R.A. (1986): The Nigerian Stock Market in Operation,Jeromelaiho and Associates Limited, Lagos.

Atedo Peterside N.A. (1996): “The Nigerian Capital Market” in the Abridge Particu-lars of the Prospectus of the IBTC Nigerian Equity Fund, Marina, Lagos.

Barry, C. B. (1986): “Financial Institutions and Markets and the Economic Develop-ment of Four Asian countries.” Securities Market Journal, Nigeria volume 3 pp. 141.

Bencivenga, Valerie R., Smith, B.D., and Starr, R.M. (1996): “Equity Markets Trans-action Costs, and Capital Accumulation: An Illustration.” World Bank EconomicReview. Volume 10 Number 2 May.

Claessens, S., and Glen, J. (1995). “Stock Price Behavior in emerging Stock Markets.”Paper for the World Bank Conference on Portfolio flows to Developing countries,Washington, D.C. The World Bank. September 9-10.

Central Bank of Nigeria (1998): Statistical Bulletin, December. Lagos.Central Bank of Nigeria (Various Years): Major Economic, Financial and Banking In-

dicators. April. Lagos.Demirguc-Kunt and Ross Levine (1996): “Stock Market Development and Financial

Intermediaries: Stylized facts.” The World Bank Economic Review. Volume 10Number 2 May.

Demirguc-Kunt and Ross Levine (1993) “Stock Markets, Corporate Finance and Eco-nomic Growth.” The World Bank Economic Review. Volume 10 Number 2. May.

Devereux, M.B., and Smith, G.W. (1994), “International Risk Sharing and EconomicGrowth.” International Economic Review. August, 35(4), pp. 535-50.

Diamond, D.W., and Verracchia (1982), R.E. (1982): “Optimal Management Con-tracts and Equilibrium Security Prices,” Journal of Finance, May, 37, pp. 275-218.

Dozie, P. G. (1997): Presidential Address at the 36th Annual General Meeting of theNigerian Stock Exchange in Lagos, 3rd June.


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

Emenuga, C., (1994): “The Capital Market as a medium for implementing the Reformof the Parastatals sector in Nigeria,” Paper presented at the Workshop on the Re-form of the parastatals sector in West Africa, Cotonou, Benin Republic, November16-19.

Emenuga, C., (1996): “Macroeconomic factors and Returns on Equities: Evidencefrom the Nigerian Capital Market, in S. Mensah (Massachusetts: Rector Press), pp.86-96.

Emenuga, C., (1998), “The Nigerian Capital Market and Nigeria’s Economic Perfor-mance,” Paper presented at the seminar organized by the Nigerian Economic Soci-ety, at Nigerian Institute of International Affairs, Lagos. 21st January.

Gautier, J. (1990): “Financial Policy and Bank Regulation.” Paper presented on Finan-cial Reform at the 5th Seminar on Central Banking in Washington, D.C., U.S.A.

Gill, D. (1982). “Developing the Securities Market: The Role of Financial Intermedi-aries, the Government and Nigerian Enterprises.” The Bullion October-December.

Greenwood, J. and Smith, B. (1996): “Financial Markets in Development, and the De-velopment of Financial Markets,” Journal of Economic Dynamics and Control,forthcoming.

Grossman, S. and Stiglitz, J. (1980): “On the Impossibility of Informationally EfficientMarkets,” American Economic Review, 70, pp. 393-408.

Holmstrom, B. and Tirole, J. (1993): “Market Liquidity and Performance Monitoring,”Journal of Political Economy, August, 101 (4) pp. 678-709.

Jensen, Michael C, and Kevin J. Murphy (1990): “Performance Pay and Top-Manage-ment Incentives” Journal of Political Economy 98 (April) pp. 225-264.

Korajczyk, R.A. (1996): “A Measure of Stock Market Integration,” World Bank Eco-nomic Review, Volume 10. Number 2. May.

Kyle, A.S. (1984): “Market Structure, Information, Futures Markets, and Price Forma-tion,” In International Agricultural Trade: Advanced Reading in Price Formation,Market Structure, and Price Instability, Boulder, Colorado, West view.

Levine, R. (1996): “Financial Development and Economic Growth: Views andAgenda,” The World Bank Policy Research Department, Finance and Private Sec-tor Development Division October.

Levine, R. (1991): “Stock Markets, Growth, and Tax Policy, Journal of Finance, Sep-tember, 46(4) pp. 1445-1465.

Levine, R. (1996): “Stock Markets, Banks, and Economic Growth,” The World BankPolicy Research Department, Finance and Private Sector Development Division.December.

Levine, R. and S. Zervos (1996): “Stock Market Development and Long-Run Eco-nomic Growth,” The World Bank Economic Review. Volume 10, Number 2pp. 323-339.

Mayer, C. (1988): “New Issues in Corporate Finance,” European Economic Review,32, pp. 1167-1188.

Obstfeld, M. (1994): “Risk-Taking, Global Diversification, and Growth,” AmericanEconomic Review. Volume 84, December.

Obadan, M.I. (1998): Presidential Address presented on the “Capital Market and Nige-ria’s Economic Development” at One-Day Seminar organised by Nigerian Eco-nomic Society at the Institute of International Affairs, Lagos. 21st January.


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

Odife, D.O. (1993): Nigerian Securities Market, Malt house Press Limited, Lagos.Odoko, F.O. (1998): “Internationalization of the Nigerian Capital Market: Lessons of

Experience.” Paper presented at a one-day seminar organised by Nigerian Eco-nomic Society at the Institute of International Affairs, Lagos. 21st January.

Ogiri, H.A. (1996): “Internationalization and Challenges for Stock broking,” Paperpresented at the Annual conference of Chartered Institute of Stockbrokers, GatewayHotel, Abeokuta. 1st November.

Ojo T. and Adewunmi, W. (1982): Banking and Finance in Nigeria. Graham LimitedU.K.

Robinson, R. I. (1964): Money and Capital Markets. McGraw Hill Book Company Inc.Saint-Paul, G. (1992): “Technological Choice, Financial Markets and Economic De-

velopment,” European Economic Review. May 36(4), pp. 763-81.Soyode, A. (1989): “An Agenda for Capital Market Studies” A Seminar Paper. Univer-

sity of Ibadan, Ibadan.Soyode, A. (1990): “The Role of capital in Economic Development,” Security Market

Journal. Nigeria, volume 6.Soyode, A. (1991): Stock Market Performance and Economic Policy: A Case Study of

Nigeria. Mimeograph. Netherlands Institute for Management (RVB), The Nether-lands.

Stiglitz, J.E. (1985): “Credit Markets and the control of capital,” Journal of Money,Credit and Banking, May, 17(2), pp. 133-152.

Stiglitz, J.E. (1993): “The Role of the State in financial Markets,” Proceedings of theAnnual Bank Conference on Development Economics. pp. 19-52.

Summers, L. and Shleifer, A. (1986): “Breach of Trust in Hostile Takeovers,” In ed., a.AVERBACH Corporate Takeovers: Causes and consequences, Chicago, Univer-sity of Chicago Press, pp. 33-56.

Summers, L. and Alan Heston. (1988): “The Penn World Table (Mark 5): An Ex-panded Set of International Comparisons, 1950-1988.” Quarterly Journal of Eco-nomics 106(2): 327-68.

Securities and Exchange Commission (1996): Facts and Figures on the Nigerian Cap-ital Market, 5th Edition. December.

The Nigerian Stock Exchange, (Various Years) “Annual Report and Statement of Ac-counts.” Lagos.

RECEIVED: 11/01/01REVISED: 05/13/02

ACCEPTED: 07/07/02


Dow

nloa

ded

by [

EC

U L

ibra

ries

] at

04:

34 2

4 Ju

ne 2

014

Documents

Stock Market Development and Long-Run Growth in Nigeria