THE GROWTH IMPACT OF CAPITAL FORMATION AND FINANCIAL MARKETS IN NIGERIA
The study looked at the effect of capital formation and financial markets on growth in Nigeria. Data for the period from 1981 to 2013 were obtained from the Annual Reports of the Central Bank of Nigeria (CBN) and the World Development Indicators (WDI). The Fully Modified Linear Regression Model (FM-LRM) was used in the study to synthesize the money market and gross capital formation, as well as the capital market and gross capital formation, to evaluate their impact on Nigerian growth. The FM-LRM results show that, in the long run, all money market variables that interacted with capital stock had a positive impact on Nigerian growth. The gross capital formation-monetary policy rate interaction (INTM) and the gross capital formation-treasury bills rate interaction (INTM2) had a positive impact on economic growth in Nigeria. The study also revealed in the long run that all the capital market variables that were interacted with gross fixed capital formation had a negative but significant impact on growth in Nigeria. The gross capital formation-market capitalization interaction (INTCI) and the gross capital formation-new issues interaction (INTC2) had a negative but significant impact on economic growth in Nigeria. The study, therefore, concludes that although the level of capital formation in Nigeria is low, it has a significant impact on economic growth in Nigeria. The study recommends that the government of Nigeria at all levels should save and inject fresh funds into the financial markets for capital formation purposes, thereby creating more job opportunities for the increasing population of the country and reducing her poverty level.