Monetary Policy Transmission Channels on the Performance of Nigerian Stock Market

Abstract

This study examined the effect of monetary policy transmission channels on the performance of Nigeria stock market. The objective is to study the extent to which monetary policy transmission channels effect performance of Nigeria stock market. Time series data were sourced from Central Bank of Nigeria Statistical Bulletin. Stock market performance measured by liquidity of the market was modeled as the function of interest rate channel, exchange rate channel, assets pricing channel and exchange rate channel. The study adopted ordinary least square as data analysis methods. The study found that 57.7% and 41.5% variation or changes in liquidity of Nigeria stock market can be traced to monetary policy transmission channels as modeled in the regression model while the remaining 42.3% and 58.5% can be explained by variables not captured in the regression model. The F-statistics which measures the model significant proved that the model is statistically significant and good to predict variation on the dependent variable. The Durbin Watson statistics of 1.543 is less than 2.00 but greater than 1.5. It proved that there is presence of negative serial autocorrelation among the variables. The beta coefficient shows that the variables have positive effect except credit channel. From the findings the study concludes that monetary policy transmission channels have moderate effect on performance of the stock market. The study recommends that Nigeria exchange rate per US dollar should be well structured and defined. Policies to leverage the depreciation naira exchange rate should be formulated and there is need to strengthen Nigeria bilateral, unilateral and multilateral trade and investment relationship for better naira exchange rate that will enhance Nigeria stock market performance and Nigeria asset prices such as a treasury bill rate should be properly factored into the monetary policy objective to encourage cross boarder flow of financial asset and investment