Central Bank Autonomy and Stock Market Index in Nigeria: An ARDL and TYDL Granger Causality Approach

Enitan Olurotimi Olurin, Felicia Omowunmi Olokoyo and Kehinde Adekunle Adetiloye

Vision, 2026, vol. 30, issue 1, 17-28

Abstract: Following the trend of granting autonomy to monetary authorities around the world beginning from the mid-1900s, the Central Bank of Nigeria had its share of gradual autonomy from 1991 culminating in the 2007 legislation. This study investigated the effect of central bank autonomy (CBA) on the stock market index (SMI) in Nigeria with data on market index, foreign direct investment (FDI), gross domestic product per capita, inflation rate, terms of trade, trade openness and effective central bank autonomy index from 1985 to 2018. The study adopted the autoregressive distributed lag and Toda–Yamamoto and Dolado–Lutkepohl approach to Granger causality. The study finds that there is no long-run relationship between the variables estimated, though short-run relationships exist. CBA has a statistically negative impact on the SMI, while FDI has a positive significant relationship with the SMI only in the short run. The only significant causality runs from FDI to SMI. The study, therefore, recommends that the Central Bank of Nigeria should have a higher level of instrument autonomy and should endeavour to come out with monetary policies that encourage diversification of the economy and engender growth in the capital market.

Keywords: Central Bank Autonomy; Instrument Autonomy Diversification; Stock Market Index (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:sae:vision:v:30:y:2026:i:1:p:17-28

DOI: 10.1177/09722629211065604

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