Liquidity, Stock Market Returns and Economic Growth in Nigeria

Abstract

The link between liquidity return, Stock market returns and economic growth in Nigeria is investigated in this study using yearly time series data from 1986 to 2023. Investigating the longterm relationships between gross domestic product, liquidity returns, stock market returns, interest rate and inflation rate is the aim of the study. The secondary data needed for the analysis came from the Central Bank of Nigeria (CBN) Statistical Bulletin and the World Bank development indicators. The study uses both the Error Correction Model and the Autoregressive Distributive Lag technique to co-integration to examine the long-term relationship between each of liquidity return and Stock market returns variables and economic growth in Nigeria. The result confirms that there is a long-term relationship between Nigeria's liquidity return, Stock market returns and economic growth. Stock market returns and economic growth in Nigeria have favorable long-term relationship. It also demonstrated the long-term negative relationship between Nigeria's LGDP (Gross Domestic Product) and Liquidity returns (LLIQ).. It also demonstrated the long-term negative relationship between Nigeria's LGDP (gross domestic product) and interest rate (LINR). It also demonstrated the long-term negative relationship between Nigeria's LGDP (gross domestic product) and exchange rate (LEXR). Accordingly, the study recommends that: the government, acting through the apex monetary authority should strengthening the stock market by way of providing conducive atmosphere that encourages returns on investment, and public authority should selflessly try out some monetary policy tools to help keep the value of the currency stable.