Share Prices Volatility and Economic Growth in Nigeria (1980 – 2018)

Keania Gbenedum Nwako, A. I Okidim and Godwin Lebari Tuaneh
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Keania Gbenedum Nwako: Department of Economics, Rivers State University, Port Harcourt, Nigeria.
A. I Okidim: Department of Agric and Applied Economics, Rivers State University, Port Harcourt, Nigeria.
Godwin Lebari Tuaneh: Department of Agric and Applied Economics, Rivers State University, Port Harcourt, Nigeria.

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Abstract: This research paper investigated the effects of share prices volatility on economic growth in Nigeria for the period 1980 to 2018. The research utilized secondary data which was sourced from the Nigeria Stock Exchange shares price list and the CBN statistical bulletin published on their website. Data for the study comprised of those on stock market prices in 5 sectors of the NSE and the growth rate of gross domestic product at constant basic prices. The Pooled Mean Group (PMG) of panel Autoregressive Distributed Lag Model (ARDL) method of analysis was adopted and analysis done using Eviews 10.0. Findings of the study showed that in the long run, both share price and share price volatility had positive signs. This implies that their shocks affected gross domestic product growth rate positively. The short-run Error Correction Term (ECT) had a coefficient of -0.512 and was statistically significant (PV<0.05. the negative sign indicated the correction of previous error in the subsequent term, the value (-0.512) implied that the speed of adjustment from the previous period to the long-run equilibrium is 51.2%. Hence, the model can converge to long-run equilibrium at a speed of 51.2%. In the short-run, share price volatility was negatively signed and statistically significant at 5% level of significance (t-cal = -1.984, PV = 0.044). This means that in the short-run (short term), volatility shocks reduced gross domestic product growth. The empirical discoveries in this research painted a negative and unstable future for the Nigerian economic growth if share price shock persists. Therefore, for long run economic growth, there is a strong need for policy makers to concentrate on policy that will improve and strengthen the economic structure. Thus, the study recommends that efforts be made towards enhancing and strengthening fiscal institutions so as to improve management of share revenues while promoting accountability and encouraging fiscal prudence in the economy.

Date: 2022-02-12
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Published in Asian Journal of Economics, Finance and Management , 2022, 4 (1), pp.79-93

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