DOI: 10.36347/sjebm.2015.v02i10.003

Pages: 971-994

This study investigates the impact of the macroeconomic variables on stock market development in Nigeria during the period 1970- 2013. To estimate the relationship, the study used unit root tests, lag selection criterion, F-bound test, ARDL short-run and long-run test, and VECM-Granger causality test. The result showed that the error correction terms contribute in explaining the changes in all the variables. Based on estimated coefficients and t-statistics, it is found that foreign direct investment, consumer price index, interest rate and oil price have a significant positive influence on stock market development in the long-run. Money supply has a significant negative influence on the stock market development. The causality test indicated the presence of short-run and long-run unidirectional causality running from foreign direct investment, consumer prices index, oil prices to the stock market development. A unidirectional causality also runs from interest rate to money supply and from money supply to consumer price index. The study recommends that; Policy makers, financial policies and investors, need to take the macroeconomic indicators into account when formulating financial and economic policies in diversification and structuring of the portfolio. The government should increase the standard of living of the people by providing essential infrastructural facilities and social amenities in order to enhance the ability of the people to save and invest in the stock market.