MACROECONOMIC COMPONENTS AND THE NIGERIAN CAPITAL MARKET: A CONTEMPORARY STUDY

Abstract

Macroeconomic variables are key components that improved Capital Market Performance. This study examined the impact of macroeconomic components on Capital Market Performance in Nigeria from 1981 to 2018. The specific objectives of this study were to analyse the relationship between gross domestic product (GDP), Domestic Credit (DC), Portfolio investment (PI) and market capitalization (MC) in Nigeria. The study is anchored on APT Model. The study used the Granger Causality test to test the interaction between independent variables namely GDP, DC, PI and dependent variable MC at the 5% level of significance. The findings amongst others showed that macroeconomic variables have significant relationship with market capitalization in Nigeria. The study using granger causality test showed that market capitalization was granger caused by changes in the macroeconomic components in Nigeria. Thus, the study concluded that macroeconomic components are significant factors that determine market capitalization in Nigeria. Hence, the study recommends the implementation of improved macroeconomic components which will encourage increased investment in the economy and stock market; and reduce capital flight into foreign improved economy and stock market.