EFFECT OF MACRO-ECONOMIC VARIABLES ON SHARE PRICES IN NIGERIAN EXCHANGE GROUP

Abstract

The main objective of this study is to examine the effect of macroeconomic variables on share prices in Nigeria. The variables considered in this paper were; All Share Price Index as the de-pendent variable while exchange rate, interest rate and inflation were used as indicators of macroeconomic variables. The study adopted ex-post facto research design using secondary data sourced from Nigeria bureau of statistics, World Bank data catalogue and Nigerian Ex-change Group from a period of 1988-2022. To meet times series and regression assumptions, the study conducted the Unit root, Heteroscedasticity, and Johansson co-integration to test the normality, stability, Homoscedasticity and long run relationships between variables. The study used Ordinary Least Square Regression statistical technique to test the hypotheses. Findings indicated that, exchange rate and interest rate have significant effects on all share indexes while Inflation has a negative insignificant influence on all share index respectively. From the findings, it was concluded that macroeconomic variables are sensitive economic indicators for predicting the behaviour of share prices in the Nigerian economy. Based on the findings, the study concludes that a favourable exchange rate has the ability of influencing foreign direct investment inflow into the stock and capital market in an economy. Also, an upsurge in interest rate drives the ever income demanding investors to move their funds to deposit money banks from the stock market to earn immediate returns. The study recommended that Government should start the process of implementing special intervention policies that could enhance broad base stock market dominance through monetary instruments to be implemented by financial institutions.