EFFECT OF NAIRA DEPRECIATION ON STOCK MARKET PERFORMANCE IN NIGERIA

Joshua, Dandaura Jeremiah ()
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Joshua, Dandaura Jeremiah: Department of Banking and Finance Faculty of Administration,, Postal: Nasarawa State University, Keffi,, https://www.afarng.org/jfafi/

Journal of Forensic Accounting & Fraud Investigation (JFAFI), 2020, vol. 5, issue 1, 125-151

Abstract: This study examines the effect of exchange rate (Naira) depreciation on stock market performance in Nigeria, over 31 years 1987 to 2017 using the annual data from Central Bank of Nigeria and National Bureau of Statistics. The study adopted the ex-post facto research design. Descriptive analysis in form of mean, median and standard deviation are used to analyze the data. Augmented Dickey-Fuller (ADF) test was used for Unit root test to determine whether the data are stationary or non-stationary. The Johansen test was conducted to test for a long-run relationship among the variables. The finding reveals that there are short-run and long-run relationships among the variables in the study. With the short-run and long-run relationship established, the vector error correction mechanisms are employed. The policy implication from this study is that exchange rate policy cannot be used to correct short-run disequilibrium in the Nigerian stock market, as it takes long term for the market to respond to changes in exchange rate. This is regardless of whether the policy being introduced is a revaluation or devaluation or a depreciation policy. The study, therefore, recommended among others that the Central Bank of Nigeria should continue to initiate more proactive policy intervention policies to stabilize the exchange rate of the naira to stimulate more foreign direct investment in Nigeria.

Keywords: Market Capitalization Development; Exchange Rate; Foreign Direct Investment; Foreign Reserve; Vector Error Correction Mechanism. (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jfaafi:0018

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