STOCK MARKET DEVELOPMENT, DEPOSIT MONEY BANKS AND LONG TERM ECONOMIC GROWTH IN NIGERIA

Abstract

This study examines the relationship between stock market development, DMBs and long term growth in Nigeria between 1980 and 2016. The data sourced from the Central Bank of Nigeria (CBN) statistic bulletin and World Development Indicator (WDI) were analyzed using the Engle-Granger Co-integration techniques and Error Correction Model (ECM), as well as the Granger Causality test to check the direction of causality. The results of the study shows some interesting findings. First, the positive relationship observe between domestic credit and long term growth suggests that measures to enhance domestic credit through interest rate transmission mechanism can encourage domestic production which will further stimulate the long term growth. Second, the negative statistics significant relationship observe between market capitalization and long term growth shows that strong commitment on the part of the government to provide appropriate regulatory mechanism to further enhance the contribution of  the financial system to the economy is require.