Effect of Globalization on Nigeria Stock Exchange and Capital Market Liberation on Economic Growth (1981 – 2011)

Year 2014, Volume: 3 Issue: 3, 357 - 370, 01.09.2014

Gerald C. Nwadike Simon Uguru Nwibo

Abstract

Liberalization of capital market is hypothesized to lead to the growth of the Nigerian capital market yet its effect at the macro-economy seems to have received negligible attention. The study therefore explored the effect of globalization on Nigeria Stock Exchange and economic growth from 1981 to 2011; and the effect of new stock issued on the capital market on globalization on the Nigerian economic growth. The study employed inferential statistics using a combination of ordinary least square regression and secondary econometrics test such as ADF and PP unit root test, and co-integration test in testing and analysis of data. The result of the analysis shows that, the coefficients of Trade Openness (TOPN), Total Inflow of Capital (TIC) and Net Flow of Capital (NFC) coefficient had a positive linear relationship with Total Market Capitalization of the Nigeria Stock Exchange (TMCSE)and if the variables increase, then Nigerian Total Market Capitalization of theNigeria Stock Exchange value (TMCSE) will increases by 1.210, 0.550, and 4.72 percent respectively. Again, with the R which stood at 0.655927 and the F- ratio of 10.96159 which was greater than the tabulated or F- critical value of 2.78 the a priori met. Similarly, the result indicates that injection of new stock into Nigeria capital market will have a significant effect on globalisation of Nigerian economy. This was statistically significant at 1% level; and at the same time has an R value of 0.86. in order to establish the findings of this study, the following were recommended: the establishment of an institution that will ensure that the capital market executive’s director maintained the rules and regulations that guided the market for the interest of the shareholders and of the economy at large so as to boost the financial responsibility of customer; There is need to ensure suitable macroeconomic environment that will encourage foreign multinational companies (MNCs) or their subsidiaries to be listed on the Nigerian Stock Exchange, relax the listing requirements to the first tier market and ensure tax rationalization in the capital market to encourage quotation and public interest in shareholdings; increasing the minimum equity capital requirements for companies other than banks, insurance companies and other financial institutions, encouraging merger and consolidation, discriminatory income tax in favours of public quoted companies.

Keywords

Globalization, stock exchange, capital market, liberation, economic growth, Nigeria

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