Abstract

The study examines the effect of the social and economic indicators on the stock market performance in Nigeria between 1981 and 2019. The study employs secondary data from the World Bank and Central Bank of Nigeria using the ordinary least squares as the technique of estimation. Findings show that regarding the economic drivers, interest rate, exchange rate, and inflation rate negatively impact the stock market while only income exerts a positive impact. However, both income and interest rate are significant economic drivers of stock performance. Regarding social drivers, life expectancy, poverty, and population exert a positive impact on stock performance. Similarly, both life expectancy and population are significant social drivers of stock market performance in Nigeria. The study recommends that monetary authorities should be cautious in avoiding discretionary policies that might hike the exchange rate; otherwise, the flow of funds to the stock market will be derailed. Also, the fiscal authority should invest massively in safety nets programmes to enhance the capacity of the growing population and reduce poverty.

Highlights

  • The economy comprises of interrelated components that interact with each other to drive growth and development

  • It is important to ask if such social indicators can play significant roles in stimulating stock performance in Nigeria? Or better still, when they are combined with economic indicators, what sort of impact can the social drivers exert on Nigeria’s stock market performance? These and some other pertinent questions are addressed in this study with the aim of recommending appropriate policies to boost the stock market performance via the significant social and economic drivers

  • The stock market performance is proxied with stock market capitalization, while economic drivers are captured with the exchange rate, inflation rate and interest rate

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Summary

Introduction

The economy comprises of interrelated components that interact with each other to drive growth and development. In spite of the discussion about the stock market's performance, which has received scholarly attention in the literature, the drivers of stock market performance remain of major concern With this in mind, studies such as Osisanwo and Atanda (2012), Patel (2012), as well as Hajilee and Nasser (2014) empirically affirmed that exchange rate, inflation rate, money supply, and gross domestic product are the macroeconomic indicators, which influence stock market performance. Consequent on the fact that all hands must be on deck in enhancing performance, this study ascertains the economic and social determinants of stock market performance in Nigeria. The novelty of this study is informed by its attempt to link social drivers to the performance of the stock market in Nigeria as opposed to the generic economic drivers of stock performance that are often analysed in the literature

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