Impact of policy measure on stock market development in Nigeria

Abstract

This research looks into the impact of monetary policy on stock market development in Nigeria. The scope of this study spanned between 1985 to 2020. The data used/ utilized for this study were mostly sourced from the Central Bank of Nigeria (CBN) statistical bulletin 2020 and the World Bank Development Indicators 2020. Adequate econometric analysis method (which is the Auto Regressive Distributed Lag -ARDL) have been employed using a time-series data for the study. The study explains the impact of monetary policy on the stock market development in Nigeria. One model was used to capture the relationship that exist between the variables and these variables are interest rate, inflation rate, exchange rate and money supply as the independent variable while the total market capitalization as a percentage of the GDP (TAMC) as the dependent variable. The findings shows that exchange rate and money supply have a positive relationship with the total annual market capitalization as a percentage of the GDP and are significant while the inflation rate and interest rate were both negatively related with the total annual market capitalization of the GDP but only interest rate was significant. The result recommends among other policies a reduction in the interest rate to encourage foreign investors and subsequently enhance the development of the stock market.