The Nigerian Capital Market and the Standard of Living: An Empirical Inquiry

Abstract

The major engine of growth and development for any economy is the capital market which accommodates certain institutions for the creation, custodianship, distribution and exchange of financial assets and management of long-term liabilities. Hence, the extent to which a country’s economy has grown and developed can be explained by the degree of development of her capital market. The capital market is the pivot upon which any economy revolves, especially in its role of creating, mobilizing and rationing long-term funds for economic growth and development. Economic development often defined as a sustained increase in income per capital, has been one of the main objectives pursued by successive governments in Nigeria. This quest is understandable since it can improve the well-being of the poor and increase the welfare of all members of society. Thus, successive government in Nigeria has adopted several fiscal and monetary policies among which were debt rescheduling, privatization, and commercialization of government enterprises; and recently, the consolidation of the banking and insurance industry. In all these efforts, the capital market played a major role. This study is intended to empirically examine the impact of the Nigerian capital market performance on the standard of living in Nigeria. In pursuance of this, we constructed a model in which the dependent variable was Per Capital Income (the proxy for standard of living),while the explanatory variables were Market capitalization, All shares index Value of transactions, Volume of transactions and Number of listed companies (proxies for capital market performance). The Ordinary Least Square (OLS) regression model was used for the analysis of data collected. Multiple regression model was used with aid of Microfit Interactive Econometric Software Package. The results indicated that: Market Capitalization, Value of transaction, All-Shares Index and number of listed companies were positively related to and capable of influencing per capital income. The results have proved that the performance of the capital market impacts positively on the standard of living in Nigeria. The study has also revealed a high popularity problem as evidenced in the impact of volume of transactions on per capital income, and the high buy-hold attitude of Nigerian investors. However, it is important to note that the place of the capital market as a catalyst for Nigeria’s Socio-economic development will remain more significant in the years to come, as it helps to support national growth and development and invariably improved standard of living.