UNMASKING THE INFLUENCE OF MACROECONOMIC FORCES ON STOCK EXCHANGE MARKET RETURNS IN NIGERIA FROM 1987-2020

Abstract

This study examined the influence of some selected macroeconomic fundamentals on stock market returns in Nigeria. Times series was used for the analysis which was sourced from Central Bank of Nigeria (CBN) and other recent documents. Time series was analysed with, descriptive analysis, unit roof test, co-integration test and auto-regressive distributed lag (ARDL). Stock exchange market returns was proxy by market capitalization (MC) and value of deals (VOD). The selected macroeconomic forces that were analysed are: inflation rate, exchange rate, broad money supply and unemployment rate. The result of the long run analysis of the model shows that exchange rate, inflation rate and unemployment were statistically significant in influencing the stock exchange market returns. While, in the short run, stock exchange market returns was influence by inflation rate, exchange rate and broad money supply and unemployment rate in Nigeria. Based on the findings the study recommends amongst others: exchange rate stabilization, reduction of money in circulation through open market operation (OMO) and fiscal policy measure to control inflationary situation in Nigeria.