AISHAT CHINAGOROM KADIRI

This study examines the role of the Nigerian Exchange Group (NGX), in promoting capital formation within the Nigerian economy. The research evaluates how the issuance of securities and market capitalization influence gross fixed capital formation (GFCF), which serves as a proxy for investment. Annual time series data spanning from 1985 to 2023 were analyzed using the Autoregressive Distributed Lag (ARDL) model to capture both short-run and long-run dynamics between the stock market and capital formation. The results reveal evidence of a long-run equilibrium relationship among the variables, confirming that the stock market have significant implications for capital formation in Nigeria. However, the direction of these effects is mixed. The issuance of securities exhibits a positive but statistically weak short-run impact, while its lagged values show negative and significant effects, suggesting that funds raised through new issues are not always efficiently channelled into productive investments. Similarly, market capitalization exerts a negative long-run influence on capital formation, indicating that growth in the market’s value has not consistently translated into real sector investment. In contrast, domestic credit exerts a strong positive effect on capital formation, while the real lending rate shows a significant negative effect, underscoring the importance of credit availability and affordable borrowing costs for investment growth. The study concludes that the Nigerian Stock Exchange plays a vital, role in mobilizing long-term funds for productive investment. It recommends that regulators strengthen market transparency, deepen public participation, promote broader access to financing instruments and ensuring macroeconomic stability to enhance the stock market’s capacity to support sustainable capital formation and economic growth in Nigeria.