A Conceptual Analysis of Price Movement, Stock Determinants and Their Effects on Economic Growth in Nigeria

Abstract

This study explores the effects price movements in stocks and its determinants on growth in Nigerian economy. The study in specific terms model’s stock price fluctuations against economic growth and insecurity, exchange rate, interest rate, inflation rate, stock price movement against GDPGR in Nigeria. To achieve the above objectives, the study employs the ex-post facto research design. Quarterly time series data were obtained from the Central Bank of Nigeria (CBN) statistical Bulletins using already available data from 1985 - 2019. The data were analyzed via the aids of econometric techniques such as the descriptive statistics test, the Augmented Dickey-fuller (ADF) unit root test, Correlation matrix and Heteroskedasticity ARCH effect, granger causality, the GARCH (1,1) model and ARDL model for estimations. Findings from the analysis shows price fluctuations had positive and significant effect on growth of the Nigerian Economy. Also, it was opined that insecurity, interest rate, inflation rate, exchange rate, and GDPGR have long-run significant effects on share price volatilities in Nigeria. Finally, it was revealed insecurity, interest rate, inflation, exchange rate and GDPGR have a long-run significant effects on share price fluctuations in Nigeria. On the bases of this finding studies recommended that Authority through its agencies should formulate working document that would stabilize macroeconomic variables and by extension reduce the fluctuation of the stock price as this is required to enhance confidence amongst investors in the market. Also, that the CBN should design and implement policy instruments that would stabilize interest rate to promote significant short run investments and sustain the long run benefits of investments in Nigeria. Government should expedite efforts to reduce the rate of inflations and stabilize the price of goods and services as this promises greater savings and encourages investments which will translate into economic growth. Lastly, policies to tackle cases of corruption in the security framework should be formulated, while the Government should be proactive about its fight against insecurity in Nigeria as this would help stabilize share prices and enhance economic growth in Nigeria.