Effect of Capital Market on Economic Development of Emerging Economies: Nigeria and South Africa

  • Chikwendu Samuel Mpamugo
  • Emmanuel E. Chigbu
  • Oforegbunam T. Ebiringa
  • Aghalugbulam B. C. Akujuobi


This study investigated the effect of capital market on the economic development of emerging economies: Nigeria and South Africa. The objective of the study was to find out if there is significant relationship between the capital market and economic development of the countries under study. The study relied mainly on secondary data for the analysis and covered the period between 1990 to 2018. In the study, human development index was used as a proxy for economic development (HDI). The augmented Dickey-Fuller unit root test, Johansen’s co-integration test, the error correction model and granger causality test were used in the analysis. Findings revealed that the relationship between market capitalization and economic development was positive but insignificant in both Nigeria and South Africa. The result also revealed that human development index is a positive and significant function of value of securities traded and stock market turnover ratio in both Nigeria and South Africa. However, while the relationship between all share index and human development index was found to be negative and significant in Nigeria, human development index was found to be a positive and significant function of all share index in South Africa. In both Nigeria and South Africa, only stock market turnover ratio was found to granger cause human development index. The study recommends that polices should be formulated to attract both local and foreign participants to the market in order to facilitate economic development.Keywords: Human development index, economic development, co-integration, capital market, causality, error correction model