Abstract
This study aimed to investigate the impact of financial market frictions on Nigeria’s economic performance over the period 1981 to 2023. Data were sourced from secondary materials, principally the Statistical Bulletin of the Central Bank of Nigeria, and were analysed using a correlation matrix alongside multivariate regression through the Ordinary Least Squares (OLS) technique. The results indicated that agency issues and information asymmetries had a statistically significant negative effect on the country’s economic output. Similarly, tax burdens and regulatory constraints were found to hinder economic growth. In addition, the monetary policy rate exerted a significant adverse influence on economic performance. The study concluded that financial market frictions disrupt the effective operation of both the money and capital markets, thereby impeding Nigeria’s economic development. In light of these findings, it is recommended that transaction costs in the capital market be minimised to stimulate investment and enhance market participation. Furthermore, tax policies should be restructured to incentivise investment, and measures should be implemented to reduce information asymmetry, ensuring that investors have access to timely and accurate financial information.
Keywords: Financial market frictions, economic performance, monetary policy, information asymmetry