International Journal of Research and Innovation in Social Science (IJRISS) | Volume VI, Issue VIII, August 2022 | ISSN 2454–6186
ELEJE, Edward Ogbonnia (PhD), NWANI, Christopher Onyemaechi & EZUEM, Daniel Moyotole
Department of Banking and Finance, Federal University, Wukari, Taraba State, Nigeria
Abstract: Extant studies have attempted to establish the possible connection between financial market long tenured debt instruments and economic growth of nations especially, the developing countries. Results so far have appeared inconclusive and in some cases contradictory due to data set, timing, and even country peculiarities; hence, the continued need for further research in this dimension. The present study is therefore a contribution in this regard. The study basically evaluates the impact of bond, a major financial market long-tenured debt instrument on economic growth of a prototype developing nation, Nigeria. Specifically, it investigates the possible effect of federal, state, and corporate bonds on economic growth within a period (2003-2020). A computer based regression and correlation analysis aided by the Special Package for Social Science (SPSS) version 20 was employed to test three formulated hypotheses. The findings from the empirical evaluation reveal that federal government bonds have strong positive impact on economic growth whereas both state government and corporate bonds have weak but positive effect on economic growth in Nigeria. Consequently, the paper recommends among others that federal government should continue to explore domestic bond market financing option for capital projects while investors should invest on the FGN bond instruments due to their riskless characteristics. Besides, state and local governments as well as corporate entities should intensify more efforts at exploring the financing potentials of the bond market to boost local level growth and contribute meaningfully to economic growth and development of Nigeria.
Keywords: Financial Market, FGN bond, State bond, Corporate bond, Economic growth
I. INTRODUCTION
Financial market long tenured debt instruments have increasingly become very relevant to the economy of many developing nations especially, the Nigerian emerging economy due to its significance to economic growth. Topical among these instruments in Nigeria is the bond instrument. A bond is a generic name for a tradable loan security usually issued to raise capital by public and private entities (Sec, 2010). The bond market is an integral aspect of the capital market. Interestingly, the Nigerian bond market is composed of both corporate bonds and government bond (Oke, Dada, & Aremo, 2021). Globally, the bond market, no doubt forms the mechanism through which the savings surplus unit of the economy is transformed into medium and long-term investment in the economy. As, such, bond markets have been