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STOCK MARKET LIQUIDITY AND MANUFACTURING SECTOR PERFORMANCE IN NIGERIA: AN APPLICATION OF ERROR CORRECTION MODEL
Abstract
This study investigate the relationship between stock market liquidity and the performance of Nigeria manufacturing sector. The study adopted the ex-post facto research design and regression analysis as methodology. Annual time series data for a 32-year period, 1985-2017, were collected from Central Bank of Nigeria Statistical Bulletin, Stock Exchange Fact Book and World Bank Handbook of Statistics for the period. It was observed that Stock market liquidity has a positive and significant relationship with the performance of Nigerian manufacturing sector (coefficient of TSML = 0.676872; t-value = 2.602554; p-value = 0.0000 0.05). The implication of this result is that stock market liquidity variable (TSML) in Nigeria has been able to increase manufacturing sector performance in Nigeria. Also it implies that the growth of Nigeria economy through manufacturing sector performance can be attributed to the level of stock market liquidity available in the country. This also shows that government policies towards enhancing stock market liquidity have impacted on the performance of manufacturing sector. Therefore, increase in stock market liquidity with 67.67% resulted to recent economic growth of Nigeria through manufacturing sector performance. We, therefore, recommend that to boost and sustain the level of stock market liquidity variable (TSML) in the Nigerian so as to have more impact on the performance of manufacturing sector in Nigeria, there is need for availability of more investment instruments such as derivatives, convertibles, futures, swaps, and options in the market. This will thus increase the demand for the services of the stock market thus, encouraging more liquidity of the market.
Keywords: Liquidity, TSML, Industrial Development, Performance, Stock Market