EFFECT OF STOCK EXCHANGE MARKET OPERATION ON DEVELOPMENT OF THE NIGERIA ECONOMY

ABSTRACT This study examined the appraisal of the effect of stock exchange market operation on development of the Nigeria economy. The study adopted gross domestic product (GDP) as proxy for stock market performance as the dependent variable, while the selected macroeconomic variables included broad money supply (BMS), all share index (ASI), interest rate (ITR), inflation rate (IFR), and exchange rate (EXR) used as the independent variables. Secondary data for the variables was sourced from Central Bank of Nigeria (CBN) Statistical Bulletins. The study employed multiple regression technique, Augmented Dickey-Fuller unit root test, Johansen co-integration test and Error Correction Model (ECM) based on the E-views 9.0 software as methods of data analysis. The analysis of data revealed that a long-run equilibrium and short-run dynamic relationships existed between the selected macroeconomic variables and stock market performance in the Nigerian Stock Exchange. Overall, the empirical results showed that all the independent variables had significant influence on stock market performance. The impact of the individual macroeconomic variables indicated that broad money supply and exchange rate had significant positive effect on all share-index, while interest rate and inflation rate exhibited an inverse relationship with all-share index. Based on the findings, the study recommended that the monetary authorities should put in place sound monetary policies that would bring about positive developments in the stock market.