Macroeconomic Determinants of Stock Price in Nigeria

Abstract

This Study examined the macroeconomic determinants of stock price in Nigeria; using time series data from 1981 to 2017. Data for the study were sourced from the Central Bank of Nigeria Statistical Bulletin. The method adopted in the analysis of data was the Ordinary Least Square (OLS) technique. The results of the estimates showed that the macroeconomic variables have long run relationship with stock price in Nigeria; specifically, the Treasury bill rate has negative impact on stock price in the long run, while Exchange rate, Gross national income and Inflation have positive relationship with stock price in the long run. Recommendations made include, aggressive export diversification by the government and strengthening of demand management measures. Recent studies on the macroeconomic determinants of stock prices in Nigeria include; Al-shami and Ibrahim (2013) and Masuduzzaman (2012). These studies were carried out in Kuwait and Europe respectively and indicated a long run relationship between stock price movement and the selected macroeconomic variables. Ramadan (2016) and Duy and Hau (2017), carried out in Jordan and Vietnam respectively found that while interest rate has a negative effect on stock prices, money supply has a positive effect. Emmanuel (2018) carried out in Nigeria show that money supply and interest rate has statistically significant effect on stock prices. Udoka , Nya and Bassey (2018) and Malaolu, Ogbuluafor and Orji (2013) all carried out in Nigeria showed no long run relationship between stock price and the macroeconomic variables. There are mixed results from the studies carried out in Nigeria. This may have been due to variations in the choice of methodology by the different studies.This study therefore seeks to evaluate the macroeconomic determinants of stock price in Nigeria. The remainder of this paper is organised as follows; Section two discusses the literature on macroeconomic determinants of stock price. Section three lays out the analytical framework and econometric methodology. Section four reports the results while section five concludes.