Oil price, macroeconomic environment and stock market performance in an oil-exporting country: evidence from Nigeria

Abstract

This study examines the dynamic interaction between indicators of macroeconomic environment, oil price and stock market performance in Nigeria from 1985 to 2014 using the autoregressive distributed lag (ARDL) bounds testing approach to cointegration analysis. The results suggest the existence of a long-run equilibrium relationship between indicators of macroeconomic environment, oil price and stock market performance in Nigeria. Stock market performance is found to be significantly related to movements in oil price in the long-run as well as in the short-run. The long-run influence of oil price on the Nigerian macroeconomic environment is found to be stronger than the short-run effect with all the indicators of the macroeconomic environment (exchange rate, inflation rate and broad money supply) responding significantly to oil price in the long-run.