Stock Market Development and Economic Growth in Nigeria and South Africa: Comparative Empirical Analysis

Abstract

The study examines stock market development and economic growth in Nigeria and South Africa usingquarterly time series data for the period 1995Q1 to 2015Q4 sourced from World Bank Indicators. The Johansen co-integration and Vector error correction mechanism were employed as estimation techniques. Stationarity test was conducted using the Augmented Dickey Fuller test.The stock market indicators used in this study were market capitalization, turnover ratio, and total value of shares traded ratio and inflation rates while real gross domestic product was used as a measure of economic growth. The study concludes that the South Africa stock market indicators on economic growth outperform that of Nigeria in the reference period. The study recommends the government of Nigeria should strengthen the institutional framework in order to enhance transactions in the stock market. The regulators of the Nigeria stock market should come up with policies to reduce likelihood of market frictions. This will enhance investors’ confidence and trading activities. The study also recommends that Nigeria and South Africa should constantly encourage bilateral relations as they have a lot to benefit economically there from.