The Long-Run Impact of Bond Market on the Growth of the Capital Market in Nigeria

Abstract

The capital market as a market for long term funds is considered a catalyst for economic growth, particularly in a developing economy like Nigeria, and bond market is an essential component of the capital market. This study examined the long-run impact of bond market on the growth of the capital market in Nigeria, covering the thirty nine years period from 1981 to 2019.  It utilised empirical method to analyse the secondary and time series data obtained for the study from the Central Bank of Nigeria Statistical Bulletin, and employed the Auto Regressive Distributed Lag (ARDL) bound test and co-integration analysis to examine the relationship between the variables. The study found out that bond market has a positive influence on the growth of the capital market in Nigeria, especially in the long run; and recommended that there is a need for the introduction and availability of more investment instruments like derivates, to boost volume of transactions on the capital market, and secondly, that both the states and federal governments should continue to float more bonds as debt instruments, not only to access funds, but to further deepen the capital market.