IMPACT OF STOCK MARKET VOLATILITY ON THE GROWTH OF THE NIGERIAN ECONOMY

ABSTRACT

The study investigates the impact of stock market volatility on the growth of the Nigerian economy for the period 1985 to 2022. The study employed correlation analysis to first examine the background characteristics among the data set, while stock market volatility was generated using the EGARCH model, and the ordinary least square (OLS) technique was employed for the main analysis of the study. The results from the empirical analysis generally indicate that stock market volatility in Nigeria was volatile for some period and in other period it was fairly stable. Also, it was found that stock market volatility (SMV) has significant positive impact on the growth of the Nigerian economy. The coefficients of market capitalisation (MCAP) and volume of transactions (VOTS) have significant positive impact on economic growth; those of value of transactions (VATS), and turnover ratio (TUROVR) has a weak negative relationship with economic growth. The study recommends among others that, since market capitalisation (MCAP) and volume of transactions (VOTS) which are also measures of market liquidity significantly impact economic growth, therefore, the Nigerian exchange limited/regulators should up their market development strategy by providing more debt instruments coupled with derivatives to both domestic and foreign investors since it may be used for speculation in the currency market. Doing this will go a long way to fast track the development of the Nigerian financial market and also reduce the risk of heightened currency speculation and macroeconomic instability and in turn speed up the level of economic growth in Nigeria.