Acta Universitatis Danubius. Œconomica, Vol 14, No 6 (2018)

Impact of Privatisation on the Development of Nigerian Capital Market: A Reassessment

Olugbenga Anthony ADARAMOLA, Adefemi Alamu Obalade, Oladeji Kehinde Adekanmbi

Abstract


This article examined the impact of privatisation on the development of Nigerian capital market. Market capitalisation (MCAP) is the dependent variable while Number of Listed Companies (NOLC), Number of Deals (DEAL), Number of Listed Securities (NOLS) and Gross Capital Formation (GCF) are the explanatory variables.  The data used in this study were obtained from secondary sources, namely the Nigerian Stock Exchange Fact book and Central Bank of Nigeria statistical bulletin. The data covered a period of 30 years ranging from 1986 to 2015 during which privatization was prominent in Nigeria. Unit root test, cointegration test, error correction model (ECM) were employed as the analytical techniques. ADF test showed that the MCAP, NOLC, DEAL, NOL and GCF are stationary at first difference while Johansen Cointegration test showed that there is a long-run relationship among the variables. Findings from the ECM revealed that GCF and NOLC have positive and significant impacts on MCAP; NOLS has positive and insignificant impact on MCAP while DEAL has a negative and insignificant impact on MCAP. The study concluded that privatisation has a significant impact on the development of Nigerian capital market. Hence, government and regulatory authorities should formulate policies aim at promoting domestic investment in the country; encourage listing of unquoted companies by removing stringent listing requirements; ensure the introduction of arrays of financial instruments with which savings could be effectively mobilised and channeled to productive investment; create awareness and sensitize Nigerian investing public of the benefits attendant to share/stock ownership in order to increase participation and Securities and Exchange Commission should be more involved in the determination of the allotment of securities during privatization in order to ensure wider spread.


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