Impact of Foreign Direct Investment on Stock Market Growth in Nigeria

Odo, Stephen Idenyi and Anoke, Charity Ifeyinwa and Nwachukwu, Johnson Obinna and E. Agbi, Promise (2016) Impact of Foreign Direct Investment on Stock Market Growth in Nigeria. Asian Research Journal of Arts & Social Sciences, 1 (2). pp. 1-14.

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This study examines the impact of foreign direct investment on the growth of the Nigeria stock market from 1984 to 2015 using co integration, vector error correction model and pair wise granger causality econometric process in the estimation of the variables specified in the regression model. The results of the test revealed a long run equilibrium relationship between the dependent and explanatory variables as supported by the existence of four (4) co integration vectors. The findings from the VECM indicated that FDI and EXPT has negative relationship with stock market growth both in the long and short run while IMP and GCF was found to have a positive relationship with stock market growth both in the short and long run periods. The result of the pair wise granger causality indicated no causality between FDI and stock market growth. A unidirectional causality however was found running from MCAP to GCF, IMP to MCAP and FDI to GCF. Based on the above results, the study concludes that foreign direct investment has no significant impact on stock market growth in Nigeria within the period of this study and consequently makes the following recommendations. First, government should by conscious policy ensure that foreign investors sourcing for investment funds in Nigeria are encouraged to go through the Nigeria stock market in raising their funds, in addition to the active participation of all multinational companies operating in Nigeria in the activities of the Nigeria stock market. Secondly, domestic investors involved in the production of exportable goods and services should by positive policy initiatives encouraged to access funds through the Nigeria stock market by the central bank of Nigeria in collaboration with the investor’s commercial bank standing as guarantor.

Item Type: Article
Subjects: H Social Sciences > HJ Public Finance
Divisions: Faculty of Management and Social Sciences
Depositing User: mrs chioma hannah
Date Deposited: 27 May 2019 14:00
Last Modified: 27 May 2019 14:00

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