IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925. Volume 11, Issue 6 Ser. IV (Nov. – Dec. 2020), PP 53-63 www.iosrjournals.org DOI: 10.9790/5933-1106045363 www.iosrjournals.org 53 | Page Impact of Capital Market on Manufacturing Sector: Evidence from Nigeria Ibitomi Taiwo 1 , Lawrence Monday Olorunfemi 2 & Adeleke Joseph Olamide 3 1. Charisma University , Turks and Caicoss Ph.D Candidature, Department of Business Administration 2. Ahmadu Bello University, Zaria, Nigeria M.Sc. Candidature, Department of Statistics. 3. Essex University, United Kingdom M.Sc. Candidature, Department of Entrepreneurship and Innovation Abstract The study investigated the impact of stock market on manufacturing sector in Nigeria. The specific objectives of the study were to determine the impact of stock market capitalization, total number of deals and value of new issues on manufacturing output. Data was collected from Central Bank Statistical Bulletin and National Bureau of Statistics. Error Correction Model was used to estimate the short run and long run impact of stock market on manufacturing output. Findings revealed that stock market capitalization has significant positive long run impact on manufacturing output; total number of deals has positive impact while value of new issues has negative impact. The study also showed that stock market has no significant impact on manufacturing sector in the short run. The study concluded that stock market has positive impact on manufacturing sector. The study recommended that the Central Bank should implement policies that will increase market capitalization; attract more investors thereby increasing the volume and value of transactions. Keywords: Manufacturing, stock market, market capitalization, new issues. --------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 25-11-2020 Date of Acceptance: 09-12-2020 --------------------------------------------------------------------------------------------------------------------------------------- I. Introduction Manufacturing sector of an economy is a sector that transforms raw materials into finished goods. This sector of the economy produces goods for domestic consumption and foreign exchange earnings. The performance and growth of the manufacturing sector is a prerequisite for transformation of an economy from a low productive to a high productive economy. The manufacturing sector is viewed as an important force that drives an economy towards a sustainable growth level in both developing and developed countries of the world.The rapid growth experienced by Asian Tigers in some years back was due to the growth in manufacturing especially exportation of manufactured products (Kwode, 2015; Oteh, 2010). In the recent world, the rapid transformation experienced by China and Malaysia was due to the rapid improvement in their manufacturing sector of their economy which has help them to become one of the notable countries in the world. In Nigeria, the manufacturing sectors have not played the expected vital and vibrant role in economic growth and development. Over the years, the sector has recorded low productivity, subjecting the economy to high rate of importation (Udoh&Ogbuagu, 2012). Consequently, the underperforming manufacturing sector in Nigeria has been of great concern to the government, operators, practitioners and the organized private sector.However, given the undeveloped and shallow nature of capital markets in developing countries like Nigeria, it is debatable whether capital markets in developing countries in general and capital market in Nigeria in particular has led to the development of manufacturing sector. The manufacturing sub-sector which is at the heart of industrial sector has continued to perform poorly over the years in Nigeria. Evidence has shown that the contribution of manufacturing sector to Gross Domestic Product (GDP) increased from 7.17 per cent in 1970 to 10.4% in 1980 before declining steadily to 5.50 per cent in 1990. By 2017, the share of manufacturing in GDP stood at 8.5 percent (CBN, 2017). Based on this data presented, the contribution of manufacturing sector to GDP at present in Nigeria is very low compared to other developed countries of the world in which the country try to emulate in the way of doing things. This is because the manufacturing sector is expected to contribute at least 25% to GDP (Iyoha, 2010). Presently, the government of Nigeria led by the leadership of Muhammadu Buhari is initiating plans on how to diversify the economy and manufacturing sector is one of the key sectors that need to be developed. The major source of capital for industries in developing economies is the capital market (Okoye, Nwisienyi & Eze ,2013). They opined that it is pertinent to note that substantial capital is required by existing