Stock Market Responses and Economic Policies in Nigeria
DOI:
https://doi.org/10.54536/ajase.v5i2.7445Keywords:
ARDL model, Economic Policy, Financial Market, Fiscal Policy, Market Capitalization, Monetary Policy, Nigeria Time Series Analysis, Stock MarketAbstract
The study empirically examines stock market responses and economic policies in Nigeria using secondary data sourced from the Central Bank of Nigeria and World Development Indicators from 1986 to 2023. The broad objective of the study was to examine the effects of fiscal and monetary policies on the Nigerian stock market. To achieve the stated objectives, the study employed the autoregressive distributive lag technique to examine the relationship between the dependent variable and the independent variables. Findings show that fiscal policy instrument such as government spending has a negative relationship with the stock market in Nigeria in both shortrun and longrun, and public debt has a positive and significant relationship with the stock market in Nigeria in the shortrun and a negative/significant relationship with the stock market in Nigeria. However, monetary policy instruments such as the monetary policy rate have a positive and significant relationship with stock market in Nigeria, both in shortrun and longrun while the liquidity ratio indicates a negative and insignificant relationship with the stock market in the shortrun and a positive/significant relationship with the stock market in the longrun in Nigeria. The study recommends that governments should actively seek and foster bilateral debt agreements, channel government expenditures towards infrastructure, education, healthcare, and sectors that drive sustainable growth to boost investor confidence and minimize stock market distortions, use borrowed funds primarily for capital projects that improve productivity and foster economic expansion, and mitigate the long-term negative effects. Also, encourage banks to maintain healthy liquidity levels while providing targeted support to sectors that boost market stability and growth. Also, the monetary authorities should monitor and adjust the monetary policy rate with careful consideration of inflation, currency stability, and economic growth targets, ensuring the stock market remains attractive and resilient.
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Copyright (c) 2026 Oliver Nsisong Effiong Etim, Saviour Friday Umanah, Chidera Okpe
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