Impact of Financial Securities on Economic Growth in Nigeria

Abstract

This study examines the impact of financial securities on economic growth in Nigeria from 1990-2022. The study employed endogenous growth model theory using the autoregressive distributed lag model estimator to establish the long run and shortrun dynamic impact of monetary policies on economic growth in Nigeria. The variables employed in this study are GDP growth, government stocks, corporate bonds and equities. The findings reveal that a non-significant long-run negative relationship existed between government securities (GSEC) and economic growth in Nigeria in the longrun. In the short run, while the immediate effect of changes in GSEC is negative but insignificant, a significant negative impact emerges from the second lag of GSEC. The analysis reveals that corporate bonds (CBOND) has a positive impact on economic growth in the longrun. While in the shortrun, the first lag showed a negative significant impact on economic growth but changed to positive significant impact in the second lag. Equities (EQT) demonstrate a significant positive impact on Nigeria's economic growth in the longrun, the current period and lagged effects of equity investment contribute to growth in the shortrun. Based on the ARDL long-run regression analysis, it is recommended that Nigeria optimize the use of financial securities government stocks, corporate bonds, and equities to bolster economic growth. Enhancing debt management practices, diversifying funding sources, and setting favorable interest rates can help manage government stocks effectively. Additionally, incentivizing corporate bond issuance, boosting market confidence, developing a secondary market, and promoting long-term equity investment, along with risk mitigation strategies, can strengthen the financial securities market and potentially support economic growth.

Key Words: Financial Securities and Economic Growth