Monetary Policy and Stock Market Prices in Nigeria

  • Umar Isah Yahaya University of Abuja, Abuja
  • Olarinde Muftahu Usmanu Danfodiyo University, Sokoto
  • Isa Aliyu Nasarawa State University, Keffi
Keywords: Monetary Policy, All-Share Index, Cointegration, Vector Autoregressive Model


This study investigated the impact of monetary policy on stock market prices in Nigeria. The study relied on Johansen cointegration test and Vector
Autoregression models to capture the impact of fluctuations in relevant monetary policy variables on stock market prices. Quarterly time series data
for the period 1986 to 2020 was sourced from Central Bank of Nigeria Statistical bulletin and World Bank Group. The result of Johansen
cointegration test indicates that there is no long run cointegrating relationship between monetary policy and stock market prices in Nigeria. The
impulse response function and variance decomposition further revealed that all monetary policy variables under investigation had marginal effects on stock prices behavior with the exception of exchange rates which had significant effect on stock market prices. The paper concludes that significant variations of stock market prices in Nigeria are not due to changes in key monetary policy variables while external balances are more important than internal balances in influencing the direction of stock prices movements in Nigeria. The study therefore recommends among other things a workable and fruitful policy of devaluation. This is predicated on the knowledge that devaluation has the potential of spurring foreign investments in the capital market thereby raising the prices of equity.

Author Biographies

Umar Isah Yahaya, University of Abuja, Abuja

Department of Economics

Olarinde Muftahu, Usmanu Danfodiyo University, Sokoto

Department of Economics

Isa Aliyu, Nasarawa State University, Keffi

Department of Political Science