Financial Intermediaries and Capital Market Development in Nigeria
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Published
May 22, 2019
Abstract
This study investigates the impact of financial intermediaries on
capital market development in Nigeria employing co-integration. To capture the
activities of financial intermediaries, five proxies were used to explain financial
intermediaries which include credit to the private sector to GDP, broad money
supply and total bank savings while on the other hand, market capitalization was
used to capture capital market development covering the period of 1981 to 2016.
The result revealed that in the long run, credit to private sector and money supply
will lead to an increase in capital market development while banks total savings
and government expenditure results to a decrease in capital market development
in the long run. The study recommends that the Central Bank of Nigeria should
ensure that the domestic credits provided by the banking sector are directed into
their appropriate uses and government expenditure be directed to productive
sectors and recurrent expenditure be reduced by government. Credit facilities
should also not be restricted to the large-scale manufacturing industries only, but
it should also be extended to small and medium scale enterprises.
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Keywords
Capital marketCentral BankFinancial Intermediaries
References
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• Adeusi, S.O., Sulaiman, L.A. and Azeez, B. A. (2013). Impact of Capital Market Development on the Nigerian Economy: A Post-SAP Analysis. Journal of Economics and Behavioral Studies, 5(1), 1-7
• Afees, A.S and Kazeem, B.A (2010). The Stock Market and Economic Growth in Nigeria: An Empirical Investigation. Journal of Economic Theory, 4, 65 – 70.
• Afonso,A., Ferreira,R., Freitas,E., Nóbrega, C. and Pinheiro J. (2002). Intermediaries, Financial Markets and Growth: Some more International Evidence.
• Agarwal, S. (2001). Stock Market Development and Economic Growth: Preliminary Evidence from African Countries.
• Aigbovo O. and Uwubamwen A. E. (2014). Financial System Development and Economic Growth the Nigerian Stock Market and Bank Perspective. Asian J. Bus. Manage., 6(4),155-172
• Akinlo, T., and Apanisile, O. T. (2014). Relationship between Insurance and Economic Growth in Sub-Saharan African: A Panel Data Analysis. Modern Economy, 5(2), 120-127.
• Ali, S. A. S. (2013). Financial intermediation and economic growth in Sudan: An empirical investigation, 1970–2011. British Journal of Economics, Management and Trade, 3(4), 332-358.
• Allen, F. and Gale, D. (2001). Comparing Financial Systems. MIT Press, Cambridge, MA.
• Anyanwu, J. C. (1998). Stock Market Development and Nigerian Economic Growth. Nigerian Financial Review, 2, 6-13.
• Ayadi, R., Arbak, E., Naceur, S. B. and De Groen, W. P. (2015). Financial Development, Bank Efficiency, and Economic Growth Across the Mediterranean. In Economic and Social Development of the Southern and Eastern Mediterranean Countries. Springer International Publishing, 219-233
• Bhattacharya, S. and Thakor, A., (1993). Contemporary banking theory. Journal of Financial Intermediation 3, 2-50.
• Central Bank of Nigeria Economic Report, (2010). Central Bank of Nigeria Economic Report, Retrieved from Http://www.cbn.gov.ng/OUT/2011/P.
• Chee, Y. L., and Nair, M. (2010). The impact of FDI and financial sector development on economic growth: Empirical evidence from Asia and Oceania. International Journal of Economics and Finance, 2(2), 107-121
• Chinwuba, O. and Amos, O.A (2011). Stimulating Economic Development through the capital market: the Nigerian experience. JORIND 9(2). 17-28
• Chotaliya E. M. and Trivedi P. (2014). Financial Intermediaries in Securities Market: An Indian Perspectiv. International Journal of Advance Research in Computer Science and Management Studies, 2(10), 24-29
• Datar, M. K. (2000). Stock Market Liquidity: Measurement and Implications Paper Presented at the Fourth Capital Market Conference, India, December, 1-11
• De Gregorio J. and Guidotti P. E. (1995). Financial Development and Economic Growth. World Development, 23(3), 433-448
• Demirgue-Kunt A. and Levine R. (1996). Stock Market Development and Financial Intermediaries: Stylized Facts. The World bank Economic Review, 10(2), 241-265.
• Donwa P. and Odia J. (2010). An Empirical Analysis of the Impact of the Nigerian Capital Market on Her Socio-economic Development. J Soc Sci, 24(2),135-142
• Edgeworth, F.Y (1888). The Mathematical Theory of Banking. Journal of Royal Statistical Society,1, 11-127. Egene, J. (2012).
• Equakun C. O (2005). The Nigerian Capital Market: Impact on Economic Growth. Masters Thesis, Unpublished. University of Benin, Benin City.
• Ferreira da Silva, G., 2002. The impact of the financial system development on business cycle volatility: Cross-country evidence. Journal of Macroeconomics, 24, 233-253.
• Flavia B. and Petru-Ovdiu, M. (2010). Capital Market Development and Economic growth: The Case of Romania. Annals of the University of Petrosani, Economics, 10(2), 31-42.
• Fulghieri, P. and Rovelli, R. (1998). Capital markets, financial intermediaries, and liquidity supply. Journal of Banking and Finance, 22, 1157-1179
• Goldsmith R. W. (1958). The Role of Financial Intermediaries in Financing the Main Investor Groups. Princeton University Press, 180-256, http://www.nber.org/chapters/c2585
• Gurley, J. G and E. S, Shaw (1960). Money and Theory of Finance, the Booking Institution, Washington, D.C.
• Ilo, B. M. (2007). The Determinants of Liquidity of the Nigerian Equity Market. Babcock Journal of Management and Social Sciences, 5(2), 65-82
• Ilo, B. M., Elumah, L. O. and Sanyaolu, W. A. (2018). Oil Rent and Financial Development: Evidence from Nigeria. Ilorin Journal of Finance, 2(1), 152-165
• International Monetary Fund (IMF) (2003). Capital Market and Financial intermediaries in the Baltic States. IMF Country Report No. 03/115. Washington, D.C. 20431
• Kafingura, F. M. (2013). Finance and economic growth nexus: Complementarity and substitutability between the banking sector and financial markets in Africa, using South Africa as a Case Study. Journal of Economics and International Finance, 5(7), 273-289
• Kolapo, F.T and Adaramola, A.O (2012). The impact of Nigerian capital on economic growth. International Journal of Developing Studies. 1(1), 11-19.
• Levine, R. (1996). Financial Development and Economic Growth - Views and Agenda, Working paper 1678, The World Bank, Washington, DC.
• Levine R. and Zervos S. J. (1998). Stock Market, Banks and Economic Growth. American Economic Review, 88, 536-558
• Mehran, H. A. (2012). Financial Intermediation and Economic Growth in Saudi Arabia: An Empirical Analysis, 1968-2010. Modern Economy, 3(5), 626.
• Nigeria’s Stock Market out of Doldrums. Retrieved from http//:http://www.thisdaylive.com.
• Nkoro, E., and Uko A. K. (2013). Financial Sector Development-Economic Growth Nexus: Empirical Evidence from Nigeria. American International Journal of Contemporary Research, 3(2), 87-94
• Odetayo, T.A and Sajuyogbe A.S (2012). Impact of Nigerian capital market on economic growth and development. International Journal of Arts and Commerce, 1(5), 1-8.
• Ogege S. and Boloupremo, T. (2014). Deposit Money Banks and Economic Growth. Journal of Financial Assets and Investing, 1, 41-50
• Ohwofasa, B. O. and Aiyedogbon, J. O. (2013). Financial Deepening and Economic Growth in Nigeria, 1986-2011: An Empirical Investigation. Journal of Economics and Development Studies, 1 (1), 24-42.
• Okereke-Onyiuke N (2000). Stock Market Financing Options for Public Projects in Nigeria. The Nigerian Stock Exchange Fact Book, 41 – 49.
• Olowe, R. A. (2008). The Impact of the Introduction of Universal Banking on the Stock Prices of Insurance Companies in Nigeria. Lagos Journal of Banking, Finance and Economic Issues, 2(1), 77-97
• Osammonyi, I O (2005). Capital Market imperfection and Community Economic Development of Nigerian. Academy of Management Journal, 1, 14-25
• Osaze B. E. (2000).The Nigeria Capital Market in the African and Global Financial System. Benin City: Bofic Consults Group Limited.
• Pesaran, M. H., Shin, Y. and Smith, R. (2001). Bound Testing Approaches to the Analysis of Level Relationship, Journal of Applied Econometrics, 16, 174-89
• Pradham, R. P., Tripathy, S., Pandey, S. and Bele, S. K. (2014). Banking sector development and economic growth in ARF countries: the role of stock markets. Macroeconomics and Finance in Emerging Market Economies, 7(2), 208-229.
• Sahoo, S. (2014). Financial Intermediation and Growth: Bank-Based versus Market-Based Systems. Margin: The Journal of Applied Economic Research, 8(2), 93-114.
• Uremadu S. O. (2008). A performance Analysis of the Nigerian Capital Market: Implications for Real Economic Activity in Nigeria. Lagos Journal of Banking, Finance and Economic Issues, 2(1), 110-132
• Waheed, A. and Younus, N. (2010). Effects of Financial Sector’s Development and Financial Sector’s Efficiency on Economic Growth: Empirical Evidence from Developing and Developed Countries. International Journal of Economic Perspectives, 4(2), 449-458.
• Yartey, C.A. (2008), Financial Development, the Structure of Capital Markets and the Global Digital Divide. Information Economics and Policy, 20(2), 208-227.
• Ziorklui, S. (2001) The development of capital markets and growth in Sub Saharan Africa: The case of Ghana. African economic policy discussion paper, No.80, Washington DC.
• Adeusi, S.O., Sulaiman, L.A. and Azeez, B. A. (2013). Impact of Capital Market Development on the Nigerian Economy: A Post-SAP Analysis. Journal of Economics and Behavioral Studies, 5(1), 1-7
• Afees, A.S and Kazeem, B.A (2010). The Stock Market and Economic Growth in Nigeria: An Empirical Investigation. Journal of Economic Theory, 4, 65 – 70.
• Afonso,A., Ferreira,R., Freitas,E., Nóbrega, C. and Pinheiro J. (2002). Intermediaries, Financial Markets and Growth: Some more International Evidence.
• Agarwal, S. (2001). Stock Market Development and Economic Growth: Preliminary Evidence from African Countries.
• Aigbovo O. and Uwubamwen A. E. (2014). Financial System Development and Economic Growth the Nigerian Stock Market and Bank Perspective. Asian J. Bus. Manage., 6(4),155-172
• Akinlo, T., and Apanisile, O. T. (2014). Relationship between Insurance and Economic Growth in Sub-Saharan African: A Panel Data Analysis. Modern Economy, 5(2), 120-127.
• Ali, S. A. S. (2013). Financial intermediation and economic growth in Sudan: An empirical investigation, 1970–2011. British Journal of Economics, Management and Trade, 3(4), 332-358.
• Allen, F. and Gale, D. (2001). Comparing Financial Systems. MIT Press, Cambridge, MA.
• Anyanwu, J. C. (1998). Stock Market Development and Nigerian Economic Growth. Nigerian Financial Review, 2, 6-13.
• Ayadi, R., Arbak, E., Naceur, S. B. and De Groen, W. P. (2015). Financial Development, Bank Efficiency, and Economic Growth Across the Mediterranean. In Economic and Social Development of the Southern and Eastern Mediterranean Countries. Springer International Publishing, 219-233
• Bhattacharya, S. and Thakor, A., (1993). Contemporary banking theory. Journal of Financial Intermediation 3, 2-50.
• Central Bank of Nigeria Economic Report, (2010). Central Bank of Nigeria Economic Report, Retrieved from Http://www.cbn.gov.ng/OUT/2011/P.
• Chee, Y. L., and Nair, M. (2010). The impact of FDI and financial sector development on economic growth: Empirical evidence from Asia and Oceania. International Journal of Economics and Finance, 2(2), 107-121
• Chinwuba, O. and Amos, O.A (2011). Stimulating Economic Development through the capital market: the Nigerian experience. JORIND 9(2). 17-28
• Chotaliya E. M. and Trivedi P. (2014). Financial Intermediaries in Securities Market: An Indian Perspectiv. International Journal of Advance Research in Computer Science and Management Studies, 2(10), 24-29
• Datar, M. K. (2000). Stock Market Liquidity: Measurement and Implications Paper Presented at the Fourth Capital Market Conference, India, December, 1-11
• De Gregorio J. and Guidotti P. E. (1995). Financial Development and Economic Growth. World Development, 23(3), 433-448
• Demirgue-Kunt A. and Levine R. (1996). Stock Market Development and Financial Intermediaries: Stylized Facts. The World bank Economic Review, 10(2), 241-265.
• Donwa P. and Odia J. (2010). An Empirical Analysis of the Impact of the Nigerian Capital Market on Her Socio-economic Development. J Soc Sci, 24(2),135-142
• Edgeworth, F.Y (1888). The Mathematical Theory of Banking. Journal of Royal Statistical Society,1, 11-127. Egene, J. (2012).
• Equakun C. O (2005). The Nigerian Capital Market: Impact on Economic Growth. Masters Thesis, Unpublished. University of Benin, Benin City.
• Ferreira da Silva, G., 2002. The impact of the financial system development on business cycle volatility: Cross-country evidence. Journal of Macroeconomics, 24, 233-253.
• Flavia B. and Petru-Ovdiu, M. (2010). Capital Market Development and Economic growth: The Case of Romania. Annals of the University of Petrosani, Economics, 10(2), 31-42.
• Fulghieri, P. and Rovelli, R. (1998). Capital markets, financial intermediaries, and liquidity supply. Journal of Banking and Finance, 22, 1157-1179
• Goldsmith R. W. (1958). The Role of Financial Intermediaries in Financing the Main Investor Groups. Princeton University Press, 180-256, http://www.nber.org/chapters/c2585
• Gurley, J. G and E. S, Shaw (1960). Money and Theory of Finance, the Booking Institution, Washington, D.C.
• Ilo, B. M. (2007). The Determinants of Liquidity of the Nigerian Equity Market. Babcock Journal of Management and Social Sciences, 5(2), 65-82
• Ilo, B. M., Elumah, L. O. and Sanyaolu, W. A. (2018). Oil Rent and Financial Development: Evidence from Nigeria. Ilorin Journal of Finance, 2(1), 152-165
• International Monetary Fund (IMF) (2003). Capital Market and Financial intermediaries in the Baltic States. IMF Country Report No. 03/115. Washington, D.C. 20431
• Kafingura, F. M. (2013). Finance and economic growth nexus: Complementarity and substitutability between the banking sector and financial markets in Africa, using South Africa as a Case Study. Journal of Economics and International Finance, 5(7), 273-289
• Kolapo, F.T and Adaramola, A.O (2012). The impact of Nigerian capital on economic growth. International Journal of Developing Studies. 1(1), 11-19.
• Levine, R. (1996). Financial Development and Economic Growth - Views and Agenda, Working paper 1678, The World Bank, Washington, DC.
• Levine R. and Zervos S. J. (1998). Stock Market, Banks and Economic Growth. American Economic Review, 88, 536-558
• Mehran, H. A. (2012). Financial Intermediation and Economic Growth in Saudi Arabia: An Empirical Analysis, 1968-2010. Modern Economy, 3(5), 626.
• Nigeria’s Stock Market out of Doldrums. Retrieved from http//:http://www.thisdaylive.com.
• Nkoro, E., and Uko A. K. (2013). Financial Sector Development-Economic Growth Nexus: Empirical Evidence from Nigeria. American International Journal of Contemporary Research, 3(2), 87-94
• Odetayo, T.A and Sajuyogbe A.S (2012). Impact of Nigerian capital market on economic growth and development. International Journal of Arts and Commerce, 1(5), 1-8.
• Ogege S. and Boloupremo, T. (2014). Deposit Money Banks and Economic Growth. Journal of Financial Assets and Investing, 1, 41-50
• Ohwofasa, B. O. and Aiyedogbon, J. O. (2013). Financial Deepening and Economic Growth in Nigeria, 1986-2011: An Empirical Investigation. Journal of Economics and Development Studies, 1 (1), 24-42.
• Okereke-Onyiuke N (2000). Stock Market Financing Options for Public Projects in Nigeria. The Nigerian Stock Exchange Fact Book, 41 – 49.
• Olowe, R. A. (2008). The Impact of the Introduction of Universal Banking on the Stock Prices of Insurance Companies in Nigeria. Lagos Journal of Banking, Finance and Economic Issues, 2(1), 77-97
• Osammonyi, I O (2005). Capital Market imperfection and Community Economic Development of Nigerian. Academy of Management Journal, 1, 14-25
• Osaze B. E. (2000).The Nigeria Capital Market in the African and Global Financial System. Benin City: Bofic Consults Group Limited.
• Pesaran, M. H., Shin, Y. and Smith, R. (2001). Bound Testing Approaches to the Analysis of Level Relationship, Journal of Applied Econometrics, 16, 174-89
• Pradham, R. P., Tripathy, S., Pandey, S. and Bele, S. K. (2014). Banking sector development and economic growth in ARF countries: the role of stock markets. Macroeconomics and Finance in Emerging Market Economies, 7(2), 208-229.
• Sahoo, S. (2014). Financial Intermediation and Growth: Bank-Based versus Market-Based Systems. Margin: The Journal of Applied Economic Research, 8(2), 93-114.
• Uremadu S. O. (2008). A performance Analysis of the Nigerian Capital Market: Implications for Real Economic Activity in Nigeria. Lagos Journal of Banking, Finance and Economic Issues, 2(1), 110-132
• Waheed, A. and Younus, N. (2010). Effects of Financial Sector’s Development and Financial Sector’s Efficiency on Economic Growth: Empirical Evidence from Developing and Developed Countries. International Journal of Economic Perspectives, 4(2), 449-458.
• Yartey, C.A. (2008), Financial Development, the Structure of Capital Markets and the Global Digital Divide. Information Economics and Policy, 20(2), 208-227.
• Ziorklui, S. (2001) The development of capital markets and growth in Sub Saharan Africa: The case of Ghana. African economic policy discussion paper, No.80, Washington DC.
How to Cite
Ilo, Bamidele M., Lucas O. Elumah, and Olumuyiwa G. Yinusa. 2019. “Financial Intermediaries and Capital Market Development in Nigeria”. Studies in Business and Economics 21 (1). https://doi.org/10.29117/sbe.2018.0107.
Section
Articles