Empirical Relationship between Stock Exchange Transactions and Key Macroeconomic Variables in Nigeria

Abstract

The study determined the influenced of some macroeconomic variables on the government stock, industrial/equities stock and total stock transactions in the Nigerian stock exchange market. Time series data were used in the study that covers the period 1970 to 2010. Unit root test (Augmented Dicker Fuller test) conducted on the data shows that some were stationary at levels and some were not. Double log multiple linear models were specify and estimated using ordinary least squares technique. The empirical results reveal that inflation; domestic savings, nominal exchange rate of N/$, value of total import and liberalization period are significant macroeconomic variables affecting the value of industrial/equities trading in the Nigerian stock exchange market. Also, external debt, nominal exchange rate, external reserves, and industrial capacity utilization rate are significant macroeconomic variables that affect the value of government stock transaction in the stock market. The study further reveals that the value of total stock transaction is significantly affected by inflation rate, domestic savings, oil revenues, and industrial capacity utilization rate. The result calls for a long term policy package that should focused on stabilization of real and monetary policy variables in the Nigerian economy. Also, institutional and operational reforms in the country's capital market are inevitable in a bit to increase the subsector's efficiency.