Macroeconomic Variables and Share Price Movement in the Banking Sector in Nigeria

Abstract

This study investigated empirically the relationship between macroeconomic variables and share price movement in the Nigerian Banking sector within the periods from 2007 to 2021. Three macroeconomic variables were chosen as the independent indices; including the exchange rate, inflation rate, and interest rate. The dependent variable was actual closing share prices of Nigerian banks on the 17^th day of February, May, August and November of each year. Information from the annual time series covering the period between 2007 and 2021 was used. The analysis started with examining the characteristics of each time series by testing their normality and correlation. Analysis from the study using Random Effects Model of Panel Least Squares regression on e-views 10 showed that only inflation rate was significant in determining the movement of share prices of the deposit money banks in Nigeria during the period studied. On the other hand, interest rate and exchange rate returned insignificant result that implied that they cannot be used to explain variations in share price movement in the banking sector of Nigeria. Based on these findings, the study recommended that there is need to promote domestic production and diversification of the economy so as to control inflation, while further studies may focus on finding out more relevant macroeconomic variables that affect share price movement of Nigerian banks.