ABSTRACT

This study examines the impact of selected macroeconomic variables on stock market returns in Nigeria over the period 1990 to 2023, based on a sample of 34 annual observations. Utilizing the Autoregressive Distributed Lag (ARDL) methodology, the analysis captures both short-run and long-run dynamics while accommodating variables integrated at different orders. In the short run, the error correction model reveals that inflation significantly influences stock market returns, with both the lagged inflation and its differenced term exhibiting strong statistical significance, thereby driving rapid adjustments towards equilibrium. Conversely, the short-run dynamics of unemployment, GDP growth, crude oil prices, interest rates, and exchange rate fluctuations are statistically insignificant, suggesting their limited immediate impact on market performance. In the long run, cointegration tests and equilibrium estimations further confirm that only inflation maintains a significant effect on stock market returns, whereas the other macroeconomic variables remain inconsequential. Based on these findings, it is recommended that policymakers prioritize effective inflation control measures to bolster investor confidence and market stability, while also addressing broader economic reforms to enhance the overall health of the Nigerian economy.