Does Stock Market Development Spurs Capital Inflows In Nigeria?

Philip Ifeakachukwu Nwosa


Previous studies have focused extensively on the impact of stock market development on capital inflows while a growing number of studies have also centered on the impact of capital inflows on stock market development. However, the findings of these studies have been grossly inconclusive. Further, the previous studies (particularly indigenous studies) did not consider the issue of causality between stock market development and capital inflows while the few studies on causality focused extensively on foreign direct investment neglecting other types of capital inflow such as foreign portfolio investment. To fill this empirical gap in literature, this study sought to examine the causal nexus between stock market development and foreign capital inflows (foreign direct investment and foreign portfolio investment) in Nigeria for the period 1986 to 2016. Using Pair-wise Granger Causality approach, the study observed the absence of causality between stock market development and foreign direct investment while unidirectional causality was observed from stock market development to foreign portfolio investment. The study concluded that development in stock market influence the inflow of foreign capital into the Nigeria capital market. The study therefore recommends that need for increased development of the stock market in order to attract more foreign capital into the Nigerian economy.


Stock Market Development; Capital Inflows; Causality; Nigeria

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