Bond Market and Economic Growth in Nigeria
Keywords:
Economic Growth, Federal Government Bond, Corporate Bond and External Bond
Abstract
Prompted by the need to assess the influence of bond market on the Nigeria’s economy , this study examines the nature of the interrelationships between Nigeria’s gross domestic product and various bond market components over the period 1981-2021. The study employs stationarity test, co-integration test, error correction (ECM) and Granger causality test. All the variables were stationary at first difference, the co-integration test reveals a significant relationship between the study variables. The ECM results show that corporate bonds (CBOND) and federal government Bond(FGNBOND) are significantly related to Nigeria’s gross domestic product while the Granger causality tests indicates that all the independent variables support and promote growth of Nigeria’s economy. The study concluded that all the bond types are valuable in predicting Nigeria’s economic growth. It is recommended that Nigeria’s government should encourage or promote the study bond types in order to create a more viable business which will promote more confidence in the investing public.
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References
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Alajekwu, B. U. and Ezeabasili, V. (2012): Stock market liquidity and economic growth: Evidence from Nigeria.Econ. J. A 2 Z, 1(2),11- 17.
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Awe,O.O.(2012).On pair wise granger causality modeling and econometric analysis of selected economicindicators. Interstates Journals.net/YEAR/2012/articles/1208002.pdf.
Brooks ,C.(2009)..Introductory Econometrics for Finance, Cambridge, University press.318-375
Burger, J. D., Warnock,F.,& Warnock.V.(2012). Emerging Local Currency Bond Markets. FinancialAnalysts Journal. 68 (4), 73–93.
Burger,J.D.,Warnock,F.E.,&Warnock,V.C.(2015).Bond market development in developing Asia.ADB Economics Working Paper Series. 448,1-26.
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Chidi-Okeke, C.N.,Ogbonna, K. S.,&Okeke, I, C.(2020). Bond market and economic development in Nigeria. International Journal Of Maritime and Interdisciplinary Research- Maiden Edition.177-187
Coase, R. (1960). The Problem of Social Cost, Journal of Law and Economics, 3, 1-44.
Debt management office(2020).An introduction to FGN bonds. https://www.dmo.gov.ng/fgnbonds
Eke, P.O., Adetiloye, K.A., Adegbite, E.O.,& Okoye, L.U. (2017). A co-integration analysis of interest rate spread and corporate bond market development in selected African economies. In: 29th IBIMA conference Sustainable Economic Growth, Education Excellence,and Innovation Management through Vision 2020, 3–4. Vienna, Austria.
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Eriki, P. O., & Okafor, C. (2006). Government bonds and capital market development: The Nigeria experience. Finance India, 22(2), 14-26.
Engle, R. &Granger,C.(1987).Co-integration and Error correction Representation, Estimation and testing. Econometrics 55(2): 251-276.
Fink, G., Haiss, P.,&Hristoforova, S. (2003) Bond markets and economic growth, IEF Working Paper. 49.
Frankel, J. (1993) Sterilisation of money inflows: difficult (Calvo) or easy (Reisen)? University of California Berkeley, Centre for International and Development Economics Research Paper, no C93- 024.
Harvey C.R. (1989). Forecasts of Economic Growth from the Bond and Stock Markets, Financial Analysts Journal, September-October 1989.
Herring, R.&Chatusripitak,N.(2001). The case of the missing market: the bond market and why it matters for financial development”, Wharton Financial Institutions Center Working Paper, University of Pennsylvania. (An earlier version appeared as ADB Institute working paper, 11, July 2000.)
Ifionu, E. P.,&Omojefe, G.O.(2013). The capital market and performance of the Nigerian economy: A time series analysis. West African Journal of Industrial and Academic Research 8(1),192-207.
Kapingura, F. and Makhetha-kosi, P. (2014). The causal relationship between the bond market development and economic growth in Africa: The case study of South Africa. Mediterranean Journal Of Social Sciences, 5(3), 126-131.
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Nkwede, F.E.(2020).Macroeconomic determinants of bond market development: Evidence from Nigeria.International Journal of Development and Management Review,15( 1),178-194.
Nnamdi,I.S.(2015).Financial market funds and economic growth nexus in Nigeria: a co-integration perspective with lessons: European Journal of Business and Management,7(2),191-202.
Nnamdi, l.S., Umar, M.E.,&Omotayo, A.F(2017).Financial market funds in Nigeria’s economic growth progress: Evidence and insights from manufacturing sector. Journal of Economics and Sustainable Development.8 (15), 1-10.
Nwiado, D. &Deekor, L.N. (2013).The domestic bond market and the development of Nigeria capital market: An Empirical analysis, Journal of Economics and Sustainable Development, 4(7),21-29.
Ogboi, C., Njogu,B.O.,& Nwankwo, E.(2016).Bond market development and economic growth in Nigeria (1982-2014). A GMM Approach.Research Journal of Finance and Accounting, 7(8),60-67.
Ogilo, F. (2014). The effect of selected macro-economic variable on bond market development in Kenya, DBA African Management Review, 4 (2), 54–62.
Oke, M. O.,Dada,o.&Aremo,O.N.(2021). Impact of Bond Market Development on the Growth of the Nigerian Economy. Folia OeconomicaStetinensia, 21(1).61-75.
Olaniyan,T.O.,&Ekundayo,S.O.(2019). Revisiting the growth effects of government bonds in an emerging capital market. Corporate governance and organizational behaviour review (3)1, 32-38.
Onaolapo, A. A.,&Adebayo, E. O. (2010). Effective development of the bond market and the Nigeria economy, Journal of Management and Society, 1(2), 38-43
Omodero, C.O. and Alege,P.O.(2021).The innovation of government bonds in the growth of an emergent capitalmarket.Journalof Open lnnovations,Technology,Market and Complexity.7(103),2-10.
Patrick,H.T.(1976).Demand following or supplying leading finance, in Meier, G.M.(ed):Leading Issues in economic development .Oxford University Press.
Pradhan, R.P.,Zaki, D.B. , Maradana, R.P., Dash, S. ,Jayakumar, M. &Chatterjee, D.(2015). Bond market development and economic growth: The G-20 experience. Review of Applied Management Study. 13(1), 51-65.
Robinson, J. (1952).The generalisation of the general theory in the rate of interest and other essays. London: Macmillan Press.
Shaw, E.S.(1973).Financial deepening in economic development. New York: Oxford University Press.
Thumrongvit,P.,kim,Y.,andPyun, C.S. (2013).Linking the missing market: the effect of bond markets on economic growth. International Review of Economics and Finance, 27(3),529-541.
Usman, I. R, Daniel, C. O. (2020).Role of capital market on economic development in Nigeria. IOSR Journal of Business and Management (IOSR-JBM) 22(5),1-6.
Yartey, C. A., &Andrianivo, M. (2010).Understanding the growth of African financial markets.African Development Review, 22(3),394-418.
Alajekwu, B. U. and Ezeabasili, V. (2012): Stock market liquidity and economic growth: Evidence from Nigeria.Econ. J. A 2 Z, 1(2),11- 17.
Alajekwu, U. B., &Achugbu, A.A. (2012). The Role of Stock Market Development on Economic Growth in Nigeria: A Time Series Analysis, An International Multidisciplinary Journal, Ethopia, 6 (1),51-70.
Amadeo, K. (2013) An Introduction to the Financial Markets, Definition, Types and Function http://useconomy.about.com/od/themarkets/a/capital_markets.
Awe,O.O.(2012).On pair wise granger causality modeling and econometric analysis of selected economicindicators. Interstates Journals.net/YEAR/2012/articles/1208002.pdf.
Brooks ,C.(2009)..Introductory Econometrics for Finance, Cambridge, University press.318-375
Burger, J. D., Warnock,F.,& Warnock.V.(2012). Emerging Local Currency Bond Markets. FinancialAnalysts Journal. 68 (4), 73–93.
Burger,J.D.,Warnock,F.E.,&Warnock,V.C.(2015).Bond market development in developing Asia.ADB Economics Working Paper Series. 448,1-26.
Central BankofNigeria statistical bulletin (2021).
Chidi-Okeke, C.N.,Ogbonna, K. S.,&Okeke, I, C.(2020). Bond market and economic development in Nigeria. International Journal Of Maritime and Interdisciplinary Research- Maiden Edition.177-187
Coase, R. (1960). The Problem of Social Cost, Journal of Law and Economics, 3, 1-44.
Debt management office(2020).An introduction to FGN bonds. https://www.dmo.gov.ng/fgnbonds
Eke, P.O., Adetiloye, K.A., Adegbite, E.O.,& Okoye, L.U. (2017). A co-integration analysis of interest rate spread and corporate bond market development in selected African economies. In: 29th IBIMA conference Sustainable Economic Growth, Education Excellence,and Innovation Management through Vision 2020, 3–4. Vienna, Austria.
Eichengreen, B. &Luengnaruemitchai,P. (2006). Why Doesn’t Asia Have Bigger Bond Markets? BISPaper 30. Basel: Bank for International Settlements.
Eriki, P. O., & Okafor, C. (2006). Government bonds and capital market development: The Nigeria experience. Finance India, 22(2), 14-26.
Engle, R. &Granger,C.(1987).Co-integration and Error correction Representation, Estimation and testing. Econometrics 55(2): 251-276.
Fink, G., Haiss, P.,&Hristoforova, S. (2003) Bond markets and economic growth, IEF Working Paper. 49.
Frankel, J. (1993) Sterilisation of money inflows: difficult (Calvo) or easy (Reisen)? University of California Berkeley, Centre for International and Development Economics Research Paper, no C93- 024.
Harvey C.R. (1989). Forecasts of Economic Growth from the Bond and Stock Markets, Financial Analysts Journal, September-October 1989.
Herring, R.&Chatusripitak,N.(2001). The case of the missing market: the bond market and why it matters for financial development”, Wharton Financial Institutions Center Working Paper, University of Pennsylvania. (An earlier version appeared as ADB Institute working paper, 11, July 2000.)
Ifionu, E. P.,&Omojefe, G.O.(2013). The capital market and performance of the Nigerian economy: A time series analysis. West African Journal of Industrial and Academic Research 8(1),192-207.
Kapingura, F. and Makhetha-kosi, P. (2014). The causal relationship between the bond market development and economic growth in Africa: The case study of South Africa. Mediterranean Journal Of Social Sciences, 5(3), 126-131.
King, R.G.,& Levine, R. (1993), Finance and Growth: Schumpeter Might Be Right, Quarterly Journal of Economics 108(3),717-737.
Kim,Y.(2000).Government bond market development in Asian. Asian development bank, Manila Philipines.
Kibet, A. (2015). The effect of government bonds on capital market growth in kenya(an unpublished M.Sc.dissertation submitted to the school of business, university of nairobi, kenya).
Mailafia, L. (2014).Determinant of bond market development in Nigeria. Retrieved from kubanni.abu.edu.ng:8080/jspui/bitstream/123456789/6263/1/Det.
McKinnon, R. I. (1973). Money and capital in economic development. Washington DC: Brookings Institution Press’
Mu, P., Phelps, P.,&Stotsky, J.G. (2013). Bond Markets in Africa, IMF working paper, No wp/13/12.
Ndinda, K.D.(2012). The relationship between the government bond issues and economic growth in kenya; MBA research project submitted to school of business, university of Nairobi: Nairobi, Kenya.
Nkwede, F.E.(2020).Macroeconomic determinants of bond market development: Evidence from Nigeria.International Journal of Development and Management Review,15( 1),178-194.
Nnamdi,I.S.(2015).Financial market funds and economic growth nexus in Nigeria: a co-integration perspective with lessons: European Journal of Business and Management,7(2),191-202.
Nnamdi, l.S., Umar, M.E.,&Omotayo, A.F(2017).Financial market funds in Nigeria’s economic growth progress: Evidence and insights from manufacturing sector. Journal of Economics and Sustainable Development.8 (15), 1-10.
Nwiado, D. &Deekor, L.N. (2013).The domestic bond market and the development of Nigeria capital market: An Empirical analysis, Journal of Economics and Sustainable Development, 4(7),21-29.
Ogboi, C., Njogu,B.O.,& Nwankwo, E.(2016).Bond market development and economic growth in Nigeria (1982-2014). A GMM Approach.Research Journal of Finance and Accounting, 7(8),60-67.
Ogilo, F. (2014). The effect of selected macro-economic variable on bond market development in Kenya, DBA African Management Review, 4 (2), 54–62.
Oke, M. O.,Dada,o.&Aremo,O.N.(2021). Impact of Bond Market Development on the Growth of the Nigerian Economy. Folia OeconomicaStetinensia, 21(1).61-75.
Olaniyan,T.O.,&Ekundayo,S.O.(2019). Revisiting the growth effects of government bonds in an emerging capital market. Corporate governance and organizational behaviour review (3)1, 32-38.
Onaolapo, A. A.,&Adebayo, E. O. (2010). Effective development of the bond market and the Nigeria economy, Journal of Management and Society, 1(2), 38-43
Omodero, C.O. and Alege,P.O.(2021).The innovation of government bonds in the growth of an emergent capitalmarket.Journalof Open lnnovations,Technology,Market and Complexity.7(103),2-10.
Patrick,H.T.(1976).Demand following or supplying leading finance, in Meier, G.M.(ed):Leading Issues in economic development .Oxford University Press.
Pradhan, R.P.,Zaki, D.B. , Maradana, R.P., Dash, S. ,Jayakumar, M. &Chatterjee, D.(2015). Bond market development and economic growth: The G-20 experience. Review of Applied Management Study. 13(1), 51-65.
Robinson, J. (1952).The generalisation of the general theory in the rate of interest and other essays. London: Macmillan Press.
Shaw, E.S.(1973).Financial deepening in economic development. New York: Oxford University Press.
Thumrongvit,P.,kim,Y.,andPyun, C.S. (2013).Linking the missing market: the effect of bond markets on economic growth. International Review of Economics and Finance, 27(3),529-541.
Usman, I. R, Daniel, C. O. (2020).Role of capital market on economic development in Nigeria. IOSR Journal of Business and Management (IOSR-JBM) 22(5),1-6.
Yartey, C. A., &Andrianivo, M. (2010).Understanding the growth of African financial markets.African Development Review, 22(3),394-418.
Published
2024-01-22
How to Cite
Obiagel iNgozi, M., & Odi. R., E. (2024). Bond Market and Economic Growth in Nigeria. GPH-International Journal of Social Science and Humanities Research, 7(01), 49-61. https://doi.org/10.5281/zenodo.10548959
Section
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Copyright (c) 2024 Mbelu, Obiagel iNgozi, Ebi, Odi. R.
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