Global Journal of Commerce & Management Perspective
Open Access

Abstract

Financial Deepening and Performance of the Nigerian Capital Market: Empirical Evidence

Raymond Osi Alenoghena,Clement Enakali-Osoba and Peter Ekundayo Mesagan

This study examines the impact of financial deepening on the performance of the Nigerian capital market over the period of 1981 to 2012. The method of analysis entailed an evaluation of the stochastic characteristics of each time series variable adopted in the study by testing their stationarity using the Im Pesaran Shin W-Stat Test. The multiple regression technique was employed to ascertain the different levels of impact on the subject matter. The findings were reinforced by the presence of long-term equilibrium relationship as evidenced by the cointegrating equation of the VECM. The model ascertained that financial deepening variables actually positively impacted on the performance of the Nigerian stock market. The study revealed Narrow Money Diversification (NMD; involving size of commercial banks’ demand deposit) and the growth of Savings (SAVR) significantly impacted the performance of the Nigerian stock market during the period of study. Though, other measures of financial deepening represented by Income (GDP) and Financial Development (FID; involving credit to private sector) exhibited positive coefficients but were not significant in explaining the performance of the capital market. It was recommended that government and other stake holders in the economy should take measures to further improve the financial deepening of the economy to enhance the performance of the capital market and achieve overall economic performance in the country. The focus of policy targets should be specific in measures to enhance bank deposits and saving. The expansion of credit to the private sector of the economy should be managed by to enhance returns to investors in the stock market. Further monetization of the economy and improved financial deepening could be achieved by through a financial inclusion programme involving the extension of financial services to deficient locations and people in the country.