Impact of Defence Expenditure on Capital Market Growth in Nigeria

Abstract: Despite the government huge funding of defence and other security related matters, insecurity seems to be on the increase across the geopolitical zones in Nigeria. This development could stifle inflows of investments into the country. However, the Nigeria Capital market is adjudged to be among of the vibrant markets globally notwithstanding of the seeming security challenges. This paper examined the impact of defense expenditure on Capital market growth in Nigeria from 1984 to 2019. The study adopted ex post facto research design, and data sourced were from the Central Bank of Nigeria Statistical Bulletin for 35 years. Time-series data extracted related to market capitalization, recurrent defense expenditure and capital defense expenditure from CBN Statistical Bulletin were used for the study. The study employed multiple regression analysis in determining the impact among the variables under investigation. The findings from the Johansen cointegration test indicate a long-run relationship among the variables in the study. The result from the Error Correction Model indicates that recurrent defense expenditure and capital defence expenditure impacts market capitalization positively and significantly both in the short and long run. It was recommended that government spending should be such that it affects market activities positively via policies that are geared boosting investment in the capital market. It was also recommended that policymakers from the fiscal end to collaborate with their monetary counterparts to formulate strategic policies that relates to defence expenditure that will boost the overall growth of the capital market both in the short and long run. Keywords: Market Capitalization: Recurrent Defence Expenditure: Capital Defence Expenditure: Nigeria.