Stock Market Development In Nigeria Research Articles

STOCK MARKET DEVELOPMENT IN NIGERIA: DO INSTITUTIONAL QUALITY AND FDI NET INFLOW MATTERS?

This study examines the effect of institutional quality and FDI net inflow on the stock market development in Nigeria for the period spanning 1996 to 2018. Symmetric method through autoregressive distributed lag model is used for the estimation of the relationship and cointegration. Stock market development is proxy by the annual stock market capitalization, while institutional quality is measured by the average of the composite index covering six categories; control of corruption, government effectiveness, political stability, regulatory quality, rule of law and finally, voice and accountability. Bound test confirms the validity of linear of variables under investigation. We found sufficient and significant evidence, affirming the role of institutional quality on stock market development both in the long run and short run. Similarly, FDI net inflow matters for the development of the stock market in the long run but not significant as expected while in the short it exerts negative and significant impact on the stock market development. This implies that foreign investors in form of portfolio investment will retard the development of the stock market in the short run if not properly managed.

Macroeconomic Variables and Stock Market Development in Africa: Evidence from Nigeria

This study examines the macroeconomic determinants of stock market development in the Nigerian economy. This was aimed at ascertaining how INF representing real interest rate, GDP representing gross domestic product per capita, and BMS representing broad money supply has stimulate the stock market development in Nigeria. Historical data was collated and estimated employing the ARDL form of Ordinary Least Squares (OLS) technique. The empirical results indicate that only inflation had a negative and significant impacts on stock market development while real output and money supply exerted positive but insignificant impacts. On the basis of the findings of this study, the following recommendations are made: The monetary authorities have to regularly review their monetary policy direction to bring inflation lower than it is; Regulatory authorities and policy makers should ensure that there is general stability in money supply and exchange rates, while trying to put the inflationary trends under control and at the same time maintain a stable interest rate regime in the economy in order to achieve improvements in stock market performance to bring about desired economic growth and national development.

Drivers of Stock Market Development in Nigeria: Does Openness Matter?

The stock market represents a major source of long-term funds. However, the Nigerian stock market lacks depth due to the weak regulatory system and legal framework. Extant studies have shown that both institutional quality and openness are enablers of the stock market. An analysis of the effects of institutional quality and openness on the development of the Nigerian stock market from 1996 to 2021 is therefore crucial. The Auto Regressive Distributive Lag (ARDL) method is used to analyze data from World Bank databases and the Lane-Milesi Ferreti index, with results showing that institutional quality has a positive and significant impact on stock market development in Nigeria. Meanwhile, development of the stock market, institutional quality, and openness are related over the long term based on the ARDL bounds test. A further finding revealed that the development of Nigeria’s banking sector and the exchange rate had positive (negative) effects on the development of the stock market, respectively. Additionally, stock market liquidity contributed to development of the market. This study came to the conclusion that an enabling stock market in Nigeria could be strengthened by the interaction of institutional quality and openness. The study concludes that strengthening Nigeria’s governance institutions through the creation of an appropriate legal framework is necessary to ensure political stability and the absence of violence in the country’s political system. Besides, the government really needs to grant autonomy to agencies in charge of tackling corruption to enable them to enjoy simultaneous openness. Monetary authorities should also ensure exchange rate stability and improved credit for domestic investment activities.

The Effects of Oil Price Volatility on Stock Market Development in Nigeria

This study examines the effects of oil price volatility on stock market development in Nigeria from the period 1993 to 2019. Average annual oil price is used as a proxy to measure oil price in this study while Proxies for stock market development are stoc

Analyses of Macroeconomic Drivers of Stock Market Development in Nigeria

The paper investigates the long run and short run relationship between the endogenous variable (stock market development) and exogenous variables (economic growth, banking sector development, inflation, stock market liquidity and trade openness) in Nigeria. Annual data were collected using desk survey approach. Autoregressive Distributed Lag (ARDL) test and ARDL error correction regression model was used after preliminary tests were carried out to ascertain stationarity properties. From the result of the analyses, it was discovered that gross domestic product, domestic credit to private sector and trade openness has negative impact on Nigeria stock market development in the long run, whereas inflation rate and total value of shares traded had a positive impact on the development of the Nigeria stock market in the long run. The results suggested that domestic credit to private sector, stock market liquidity, ratio of credit to private sector, total value of traded stock as well as ratio of trade openness are key drivers of stock market development in Nigeria. As part of recommendations, government should strengthen and solve the weaknesses affecting development of Nigeria’s stock market. Policy makers should pursue those policies that stimulate banking sector development so as to promote immediate development of the stock market and government should intensify efforts in stability of inflation rate so as to promote stock market development in the long- run.

Analysis of foreign capital inflows and stock market performance in Nigeria

Most studies concentrate on the impact of only one constituent of the foreign capital influx on the stock market and economic performance, but only few studies simultaneously considered the unique impact of the duo of foreign portfolio investment (FPI) and foreign direct investment (FDI), and many of these studies were not undertaken in Nigeria.This study, therefore, assesses how foreign capital inflows (FPI and FDI) affect the stock market development in Nigeria. The foundations for the empirical study were built upon the dividend discount model, which formed the basis for the analytical framework. Going forward, the ARDL co-integration procedure was adopted to examine the long-run relationship between foreign capital and stock market performance. The results from the ARDL Bounds test suggest no evidence of a long-run equilibrium relationship between foreign capital inflows (FDI & FPI) and the stock market performance. Also, the short-run analysis indicates an insignificant relationship between FDI and stock market performance, whereas, a reversed relationship was obtained for FPI, as it exerts a positive and significant impact on stock market performance. The study recommends strengthening the institutional framework for the enlistment of multinational companies in the Nigerian stock market.

Foreign Capital Inflows and Stock Market Development in Nigeria: An Asymmetric Causality Approach

The study used the recently developed symmetric and asymmetric Granger causality test by Hatemi-J to investigate the causal relationships between foreign capital inflows and stock market development in Nigeria from 1986 to 2019. The findings show unidirectional symmetric causality between stock market development and foreign direct investment, while no symmetric causality was found between stock market development and foreign portfolio investment. The results show unidirectional asymmetric causality of positive and negative shocks of stock market development to the negative shock of foreign direct investment. In contrast, the negative shock of stock market development shows a unidirectional asymmetric causality to the positive shock of foreign portfolio investment. The results revealed the causality relationship between foreign capital inflows and stock market development, including positive and negative aspects in Nigeria. These findings have implications for portfolio design and strategies that are important to policymakers and investors.How to Cite:Awoleye, E. O., (2022). Foreign Capital Inflows and Stock Market Development in Nigeria: An Asymmetric Causality Approach. Signifikan: Jurnal Ilmu Ekonomi, 11(2), 339-354. https://doi.org/10.15408/sjie.v11i2.26195.JEL Classification: G12, F21, D82, C19

The Role of Foreign Direct Investment in Stock Market Development in Nigeria: A Test of Complementarity

This paper examines the role of foreign direct investment (FDI) in stock marketdevelopment in Nigeria for the period 1981-2018 via Dynamic Ordinary Least Squares(DOLS)and pairwise Granger causality techniques. Empirical Öndings indicate that FDI plays apositive signiÖcant role in the development stock market in Nigeria. Also, a unidirectionalcausality áows from FDI to stock market development. This study concludes that FDI con-stitutes a catalyst to stock market development in Nigeria, which implies the complementaryrole of FDI in stock market. Therefore, Nigerian government should ensure investors-friendlymacroeconomic framework and implement policies to encourage ináows of FDI in Nigeria.

Intertemporal Policy Mix and Stock Market Development in Nigeria

Intertemporal Policy Mix and Stock Market Development in Nigeria

Testing the Validity of the Simultaneous Openness Hypothesis in Nigeria (1990–2015)

AbstractSince the seminal paper by Rajan and Zingales in 2003, a plethora of studies have been motivated to establish whether the simultaneous opening of trade and capital borders leads to financial sector development. We test whether the simultaneous openness hypothesis is valid for Nigeria, with a focus on the banking sector and stock market. Using annual data from 1990 to 2015 and an instrumental variable regression estimation technique, we show that the simultaneous increase of trade and financial openness limits banking sector and stock market development. Thus, there is no empirical evidence to validate the simultaneous openness hypothesis in Nigeria. It also shows that trade openness is more beneficial for banking sector and stock market development in Nigeria than financial openness.

Foreign Portfolio Investment And Stock Market Development in Nigeria

The exposure and vulnerability of financial markets in developing countries have been at center stage of empirical debates in recent time. The crux of the debate is not whether the financial system is isolated or not but the extent of such exposure. As an attempt to investigate the Nigerian exposure to external shock, this paper investigates the impact of foreign portfolio investment on the stock market between the study period of 1980 and 2014. Data for the study were sourced from the statistical bulletins published by the Central Bank of Nigeria. A model that captures the fundamental drivers of stock market development was built while the time series properties of the variables were examined using Augmented Dickey Fuller and Johansen co-integration tests. In view of the results of the pre-estimation tests, the Error Correction Modeling approach was used to estimate and examine the relationship between foreign portfolio investment, stock market development and other variables such as economic growth, exchange rate and inflation rate. The results show that there was a significant positive long run relationship between foreign portfolio investment and stock market development. It was also found that the level of domestic economic activities, exchange rate and inflation rate were other key fundamentals dictating the momentum of investment flow and direction of stock market development in Nigeria. The lagged error correction term (ECMt-1) is -0.012 indicating that the speed and time to full adjustment from short run shock to long run stability is low. The paper concludes that portfolio investment is a major driver of stock market development and more importantly, the main channel through which external financial instability is transmitted into the Nigerian economy. The policy implication is that increase in the foreign portfolio investment increases the domestic stock market performance. This could however lead to a great instability and financial distress if the enabling domestic macroeconomic conditions and policy framework to insulate the stock market against the vagaries of external shocks are not properly coordinated.

Interest Rate, Foreign Exchange Rate, and Stock Market Development in Nigeria

This research investigated the effect of interest rate and foreign exchange rate on stock market development in Nigeria. This research was centered on two research problems. First, it was whether interest rate had a significant effect on stock market development in Nigeria. Second, it was whether foreign exchange rate had a significant impact on stock market development in Nigeria. The scope of the research covered the period from 1981 to 2017. Data for this period were chosen because it covered pre and post-liberalization periods of Nigerian financial system. This research made use of ex post facto research design. Secondary data were sourced from Nigerian Stock Exchange reports, Central Bank of Nigeria statistical bulletins, and National Bureau of Statistics publications. Data were collected on Stock Market Capitalization (SMC), Prime Lending Rate (PLR) and Real Exchange Rate (RER) (Nigerian Naira in relation to American Dollars of the United States). Data analysis was carried out with Ordinary Least Squares (OLS) and Cochrane-Orcutt Iterative techniques. The findings reveal that interest rate has a significant negative effect, and foreign exchange rate has a significant positive effect on Nigerian stock market development during the period covered. It is suggested that monetary authorities should strive to formulate policies that will make interest and foreign exchange rates stable, competitive, and at a level that will stimulate the investment of funds in the stock market.

Investigating the Nexus between Institutional Quality and Stock Market Development in Nigeria: An Autoregressive Distributed Lag (ARDL) Approach

AbstractThis study investigates the nexus between institutional quality and stock market development. The Autoregressive Distributed Lag Model (ARDL (1,1)) and ARDL bounds testing procedure (Pesaran et al., ) was adopted for the estimation. We used annual time series data that covers the periods 1985 to 2013. Institutional quality is measured with corruption control, democratic accountability and bureaucratic quality, while stock market development is measured with market capitalization ratio. The institutional quality captures the degree of transparency and the level of investors' confidence while market capitalization measures overall performance. In addition, we also accounted for the influence of the banking sector (proxy: ratio of credit to the private sector). We control for the influence of variables such as stock market liquidity and per capita income. The results of the bounds test suggest that institutional quality and market development move together in the long run. Further investigation also shows that corruption control and democratic accountability are key institutional measures that impact significantly on stock market development, suggesting that institutional quality promotes the degree of transparency and investors' confidence. Other variables such as stock market liquidity, bureaucratic quality and per capita income were also found to be important determinants of stock market development in Nigeria. Hence, given the above findings, the relevant authorities should increase their efforts to control the level of corruption through the enhancement of the regulatory framework that could ensure accountability and efficient monitoring of the market actors for the sustainability of investors' confidence and the promotion of stock market development in Nigeria.

Determinants of Stock Market Development in Nigeria: A Cointegration Approach

This study examined the determinants of stock market development for the period of 1977-2010. The study further investigated the long run and short run relationship between the variables, using ex-post facto research design and the utilization of Johansen Co-integration and Error Correction Model (ECM) approach. The empirical result indicates that market capitalization, credit to private sector and exchange rates are all important determinants of stock market development both in the long run and short run in Nigeria as these variables have positive effect and thus stimulate economic growth in Nigeria while inflation and saving rate had negative impact on stock market development in Nigeria. These results as they stand have some policy implications and it therefore follows that to achieve accelerated stock market development and economic growth in Nigeria, monetary authorities should effectively moderate and control the inflation and savings rate so as to sustain macroeconomic stability. This study therefore recommended amongst others that policy makers should be concerned with stock market liquidity, given that market capitalization is a strong indicator of stock market development in Nigeria.

Financial malpractices and stock market development in Nigeria

Purpose– The purpose of this paper is to investigate if the prevalence of corruption and other unwholesome financial practices in Nigeria contributed substantially to the stunted growth of the capital market in general, and the stock market in particular.Design/methodology/approach– The paper employed Gregory–Hansen cointegration approach to test the long-run equilibrium relationship between the occurrence of predatory banking practices and stock market capitalization in Nigeria.Findings– There exists a long-run equilibrium relationship between bank fraud and stock market capitalization but with a structural break in 2005.Practical implications– There is an urgent need to overhaul and re-assess from time to time the existing systems of internal checks and controls in banks, as well as other financial institutions in Nigeria.Originality/value– This paper is the first to empirically test the long-run equilibrium relationship between bank fraud and stock market capitalization in Nigeria.

Dynamic Effects of Capital Flow Shocks upon Stock Market Developments in Nigeria

Aims: To analyze the dependent relationship between capital flow and stock market development in Nigeria. Study Design: case study (Nigeria) Methodology: the study employed the use of Vector Auto-regression Model (Granger ‐ Causality Wald Test, Impulse Response Test and Variance Decomposition Test), to enable us achieve our objectives. Scope of the Study: 1986 ‐ 2012. Results: the granger causality result shows that Capital Account Balance (Deju), Foreign direct investment (FDIN), Net portfolio investment (NPI), Real gross domestic product