Effect of Macroeconomic Variables on Share Price Movement in the Banking Sector in Nigeria

Abstract

This study was to carried out to investigate empirically the effect of macroeconomic variables on share price movement in Nigerian Banking Industry within the periods from 2010 to 2019. Three macroeconomic variables were chosen as the independent indices; including the exchange rate, inflation rate, and foreign portfolio investment. For the movement of the share prices, the Nigerian banking sector index was used as proxy. Information from the annual time series covering the period between Q1 2010 and Q4 2019 was used. Analysis from the study showed that foreign exchange rate, and foreign portfolio investment are both significant in determining the movement of share prices of the deposit money banks in Nigeria during the period studied. On the other hand, inflation was insignificant which implies that it cannot be used to explain variations in share price movement in the banking sector of Nigeria. Based on these findings, the study recommended that there is need to formulate macroeconomic policies aimed at reducing the high dependence on imported products. This will curtail depreciation of the Naira, as well as high inflation rate. There is also need to promote local participation in the Nigerian equities market so as to cushion the adverse effect of foreign portfolio investors' incessant entrance and exit strategies.