ABSTRACT:

Harnessing economic resources for national development is a major goal of governments; the stock market provides the medium through which funds could be mobilized and allocated for investments for development.  This study sought to examine empirically whether stock market liquidity, savings rate, investment ratio, and foreign direct investment (FDI) were determinants of stock market development in Nigeria from 1970-2007.  Using secondary data from the Central Bank of Nigeria Statistical Bulletin, 2007, and adopting co-integration and error correction mechanism (ECM), we found that stock market liquidity, savings rate, and one-period lagged stock market development were significant predictors of stock market development in Nigeria.  It implies that improving liquidity of the market would impact the stock market; more domestic firms should be encouraged to enlist in the market and Nigerian businessmen abroad should enlist their companies in their home stock market to increase liquidity in the market.