CAPITAL MARKET DEVELOPMENT AND INFLATION IN NIGERIA

ABSTRACT :This study examined the impact of inflation and capital market development in Nigeria. Theultimate objective of the study is centered on an empirical investigation of inflation and its impact on the growthof the Nigerian capital market, and also the trend of inflation and capital market development in Nigeria. Inorder to achieve these objectives, the study used tables and graphs to examine the trend of inflation and capitalmarket development in Nigeria. Augmented Dickey Fuller unit root test was used to check the behavior of data,and the ARDL bound test was used to check if variables are cointegrated. Post estimation test which includesthe serial correlation, heteroskedasticity and the histogram normality test was also conducted. Data werecollected from secondary sources, such as central bank of Nigeria statistical bulletin and the world developmentindicator. The unit root test revealed that the financial sector, financial intermediaries and interest rate werestationary at levels but exchange rate, inflation, government spending and trade openness became stationaryafter the first difference. Empirical findings confirmed that there is a statistically significant long- and short-runnegative effect of inflation on capital market development. On the contrary, economic growth has a statisticallysignificant long- and short-run positive impact on capital market performance. In addition, results confirmedthat there is positive support of the previous financial sector policies on capital market performance in thecurrent period.