Stock Market Performance and Manufacturing Growth in Nigeria

International Journal of Research and Innovation in Social Science (IJRISS) | Volume VI, Issue III, March 2022 | ISSN 2454–6186

Stock Market Performance and Manufacturing Growth in Nigeria

Awe, Isaac Tope
Department of Economics, School of Social and Management Science, Bamidele Olumilua University of Education, Science and Technology, Ikere – Ekiti, Nigeria.

Abstract: This study examined nexus between stock market performance and manufacturing growth in Nigeria using data spanning between 1985 and 2020. Vector Autoregression (VAR) model was employed to examine the complex interaction between the variables. The result of stationarity test through Augmented Dickey-Fuller (ADF) and Phillip Peron (PP) affirmed the use of VAR. the study concluded that stock market performance has significant influence on manufacturing growth. Hence, government should make concerted effort by making appropriate monetary policy that will promote stock market performance that will leads to capacity growth of manufacturing sub-sector.

Keywords: Stock Market Performance, Manufacturing Growth, all share index, Equity and industrial Loan

I. INTRODUCTION

The studies on the stock market returns or performance have received considerable attention in recent times because stock market performance is considered to be one of the major determinants of macroeconomic performance in every country, Nigeria inclusive (Donatus, 2009 and Robert, 2008). Obadan (1998), opined that an active stock market contribute to changes in the general level of economic activities which can lead to sustainable economic growth. Majority of Africa countries are richly endowed with natural and mineral resources that ought to have exerted greater influence on their economic growth and if these resources are properly annexed with adequate capital needed, some of Africa countries supposed to be among the developed countries. Nazir, Nawaz & Gilani (2010) agreed that stock market is important pillar of the country’s economy.
Nigeria Stock market has experienced remarkable progress since 1981 as evidence by the major stock market performance indicators such as number of listed companies, all share price index and market capitalization. More evidence from Central Bank of Nigeria (2018) indicates that market capitalization for 1985 values at N6.6 billion and increase to N285.8 billion in 1996 but fall to N281.9 billion and N262.6 billion in 1997 and 1998 respectively. Stock market capitalization rose from N300 billion in 1999 to N13.18 trillion while another fall was witness between 2008 and 2009 with N9.56 trillion and N7.03 trillion respectively. Market capitalization then rose from N9.92 trillion in 2010 to N19.08 trillion 2013 and later witness fluctuation. Stock market has played vital role in Nigeria economic development most especially in improving private sector and proved to be an important source of capital or financial investment for the private sector. The bulk of the recapitalization of the banking sector was realized through stock market.
Manufacturing sector plays an important role as a driver of innovation, productivity growth and technological change in the global economy. It is no doubt that the growth in the sector is the major factor that leads to economic diversification of most economies of the developed countries of the world (Eze. Emeka and Ogbonna, 2019). Various measures have been taken by successive governments in Nigeria which led to introduction of various reforms in the country. The major objective of these reforms was the diversification and restructuring of the productive base of the economy with a view to enhancing efficiency and reducing its dependence on oil exports. The Structural Adjustment Programme (SAP) as a reform strategy, introduced in 1986 to bail the country out of its numerous challenges had favourable effect on agriculture but a negative effect on manufacturing. The relative contribution of manufacturing production to GDP showed that SAP, indeed, triggered a shrinking growth of the manufacturing sector which contributed 8.7% to GDP in 1986. However, with the adoption of SAP, the manufacturing sector’s relative share in output began to fall and reached a 5.29% in 1989 and fell further to 4.96% in 1990s. Despite these reform strategies, oil export is still expanding while the non-oil export is yet to improve appreciably (Awe, 2018). This shows that the reforms are not capable of diversifying the Nigerian economy which would have boosted manufacturing productivity to pave way for sustainable economic growth.

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