MACROECONOMIC FACTORS AND STOCK MARKET PERFORMANCE IN NIGERIA: EMPIRICAL EVALUATIONS
Abstract
The Nigerian stock exchange is a vital component of the nation’s economy, providing a means of wealth creation, capital mobilization, and economic growth. Nonetheless, several macroeconomic factors impact stock market performance, which can present investors and market players with both possibilities and difficulties. The increase in the gross domestic product (GDP), inflation, interest rates, currency rates, and foreign direct investment (FDI) are a few macroeconomic factors that have the power to have a big impact on stock market performance. This research, which was based on the theory of arbitrage pricing, created a model of stock market performance by utilizing a few key macroeconomic variables as predictors, including GDP growth, the money supply, credit to the private sector, and foreign direct investment. The autoregressive distributed lag technique was utilized in the study to analyze the data and determine how these factors influenced stock market performance proxied by stock market capitalization. The outcome of this study revealed that gross domestic product was found to positively and significantly affect the stock market capitalization in Nigeria (B = 1.294702, P = 0.0588) at a 10% level of significance; money supply was found not to significantly impact stock market capitalization in Nigeria (B = -0.973407, P = 0.2674); credit to the private sector recorded a positive and significant impact on stock market capitalization in Nigeria (B = 3.064146, P = 0.0305) at 5% level of significance; while foreign direct investment could not significantly influence stock market capitalization in Nigeria (B = 2.437674, P = 0.2835). Thus, the study established that GDP and credit to the private sector are important macroeconomic factors that influence the performance of the stock market in Nigeria. Also, contrary to expectations, this study provided evidence that money supply and FDI failed to influence stock market performance.