OIL PRICE VOLATILITY AND STOCK MARKET PERFORMANCE IN NIGERIA

ABSTRACT

This study examined the impact of Crude Oil Price Volatility (COPV) on the Nigerian Exchange with respect to performance index of four identified sector therein. The sectors are the Banking Sector Index (BSI), the Oil and Gas Sector Index OGSL, Insurance Sector Returns (INSR) and the Consumer Goods Sector Index (CGSI). The study period is from 2009 through 2020: The study utilized descriptive statistic and correlation matrix. Stationarity status of the variables was ascertained by employing the unit root test. Two ARCH family tests: GARCH (1,1) and EGARCH (1,1) was also examine to test the transmission leverage effect of Crude Oil Price Volatility. The findings reveal that while BSI, OGSI and CGSI are functions of COPV, INSR do not reflect any ARCH effect. It was observed that BSI has the more leverage effect from COPV than the OGSI and CGSI, meaning that the banking sector is more influenced by the fluctuations in crude oil prices than the oil and gas sector and the consumer goods sector. Good News (innovations) causes more volatility than the bad news in the BSI. It is therefore advised that diversification of the economy should be embarked on by the government in order to protect the banking sector from possible danger of over dependence on one risk factor (which the government cannot control).