Interaction Between Monetary Policies and Stock Market Development in Nigeria: An Econometrics Analysis (Published)
This study explored the interplay between monetary policies and stock market development in Nigeria, focusing on key monetary policy variables such as interest rate, money supply, exchange rate, and liquidity ratio. Stock market development was measured through market capitalization. Anchored in Monetarism theory and the Efficient Market Hypothesis, the research utilized annual time series data spanning from 1990 to 2023, sourced from the Central Bank of Nigeria (CBN) statistical bulletin and Nigeria Exchange Group (NGX). Analytical methods included descriptive statistics, the Augmented Dickey-Fuller (ADF) unit root test, and the Autoregressive Distributed Lag (ARDL) approach. Results revealed that interest rates negatively and significantly impact stock market capitalization, while broad money supply and exchange rates exhibit positive and significant effects. Conversely, liquidity ratio was found to have a negative but non-significant impact on market capitalization. The study concluded that monetary policy serves as a critical stabilization tool influencing stock market development in Nigeria. It recommended that the Central Bank of Nigeria adopt a balanced approach in setting the Monetary Policy Rate (MPR) to effectively manage market expectations.
Keywords: Exchange Rate, Interest Rate, Liquidity Ratio, Monetary Policy, Money Supply, market capitalisation, stock market
Effect of Crude Oil Price Shock on Inflation and Exchange Rate in Nigeria (Published)
: The study examined the effect of crude oil price shock on inflation and exchange rate in Nigeria. The study adopted an ex-post facto research design, covering the period between 1990 and 2022. Secondary data were extracted from the CBN Statistical Bulletin and World Development Indicators. Multiple regression technique was used for test of hypotheses. The findings revealed a noteworthy adverse effect of oil price shocks on Nigeria’s inflation rate, indicated by a probability value of 0.0180. Additionally, the impact of oil price shocks on exchange rates in Nigeria was also adverse and statistically significant, as reflected by a probability value of 0.047. Moreover, these findings align with established economic theory. The negative effect of oil price shocks on the exchange rate can be explained by the consistent devaluation of the Naira relative to the US Dollar in response to abrupt, particularly negative, changes in oil prices. The study, therefore, recommended that the government should enhance the proportion of funds allocated to the excess crude accounts relative to its revenue expenditures. By doing so, the government can build a financial cushion that can be tapped into when price shocks disrupt the crude oil market. Furthermore, it is advisable to employ contractionary monetary and fiscal policies when price shocks occur. These policies can effectively counteract excessive cost-push inflation that may result from the shocks. By reducing the overall demand in the economy through measures like higher interest rates and reduced government spending, inflationary pressures can be curbed.
Keywords: Devaluation, Exchange Rate, Inflation, crude oil price shock, excess crude accounts, financial cushion