Response of the Nigerian stock market to changes in selected macroeconomic variables (1999 -2021)

Abstract

The study examined the effect of macroeconomic variables on the stock market performance in Nigeria from 1999 to 2021 using the Auto Distributive Lag Model (ARDL) of Multiple Regression. Market capitalization (MCAP), aggregate spending (AGS), money supply (MS), the exchange rate (EXR), inflation rate (INF), and interest rate (INT) data were sourced from the CBN Annual report. ARDL cointegration bound test and error correction model estimation techniques were employed. The findings of the ARDL revealed that the exchange rate, interest rate, and money supply were all significantly related to market capitalization in Nigeria at 5% levels of significance, while aggregate spending was insignificant. The results also concurred with the a priori expectations as the inflation rate showed a negative effect on the stock market performance. The study concluded that there exists a long-run relationship between macroeconomic variables and market capitalization in Nigeria,and recommended that the Nigerian government should foster economic policy capable of ensuring stability in the stock market as it has a commensurate effect on the general growth of the economy.