ANYAMAOBI, Chukwuemeka
Department of Banking and Finance, Rivers State University
1chukwuemeka.anyamaobi@ust.edu.ng
and
OKEY-NWALA, Precious O.
Department of Banking and Finance, Rivers State University
preciousemodel1971@yahoo.com
ABSTRACT
The purpose of this study was to examine the effect of financial deepening indicators on capital market performance in Nigeria. Time series data were sourced from Central Bank of Nigeria Statistical Bulletin, from 1986-2019. All share price index was used as dependent variables while percentage of narrow money supply, broad money supply, money market development, money outside the bank and private sector credit to gross domestic product was used as independent variables. Multiple regression with ordinary least square properties of cointegration, augment Dickey Fuller unit root test, Granger causality test and vector error correction model was used to examine the relationship between the dependent and the independent variables. The study found that 47 percent variation on the performance of Nigeria capital market can be traced to variation in financial market deepening indicators. percentage of narrow money supply, money market development, private sector credit and money outside the banks have positive and no significant effect on capital market performance while percentage of broad money supply have negative and no significant effect on capital market performance. From the findings the study concludes that financial deepening indicators have no significant effect on performance of Nigeria capital market. It recommend that the need to sustain a higher level of financial deepening in Nigeria, Policy makers and the regulatory authorities should identify and monitor key business drivers such as bank credit to the real sector and the regulatory authorities such as the Securities and Exchange Commission should hedge against sudden liquidity outflows should be maintained and there should be regular review of prudential guidelines for efficiency to hedge against the negative impact of financial deepening measures on capital market performance.
Keywords: Financial Deepening, Stock Market Performance, Market Size, Liquidity