Analysis of oil revenue and the Nigerian capital market: A vector autoregression approach. Babarinde, G. F., Suleiman, M. B., & Abdulmajeed, T. I.


It is expected that revenue generated by the government should be used to grow both the real and financial sectors of the economy. The extent to which capital market as an engine room for capital formation and economic growth, is impacted by government oil revenue is a subject worthy of consideration especially in an oil-dependent country such like Nigeria. Therefore, this study applied Vector Autoregression (VAR) technique to the analysis of the nexus between oil revenue and market capitalization of the Nigerian Stock Exchange. Based on secondary data obtained from Central Bank of Nigeria’s statistical bulletin for the period 1981 to 2020, the study attests to lack of long-run relationship between oil revenue and stock market capitalization in the country. Therefore, in the short-run, oil revenue has positive but non-significant impact on capital market capitalization in Nigeria. Inference from the VAR analysis reveals that there is no causal relationship between oil revenue and stock market capitalisation in Nigeria. By this analysis, oil revenue is shown to have the potential of promoting the expansion of Nigeria’s capital market, but the potential seems not to be presently harnessed so as to be significantly impactful. It is thus concluded that oil revenue exerts no significant impact on capital market performance in Nigeria even though both are positively correlated. It is recommended that a greater portion of oil revenue of Nigeria should be ear-marked for developing institutions, policies, programmes, and infrastructures capable of stimulating the growth of the Nigerian capital market. Keywords: Capital market, Market capitalization, Oil Revenue, Vector Autoregression

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