Currency devaluation and capital market performance in Nigeria

Olanrewaju Victor SADIBO * and Abiodun Oladele ADIGUN

Department of Security & Investment Management Technology, School of Logistics and Innovation Technology, Federal University of Technology Akure, Nigeria.
Review Article
World Journal of Advanced Research and Reviews, 2024, 22(03), 1872–1882
Article DOI10.30574/wjarr.2024.22.3.0888
Publication history: 
Received on 11 February 2024; revised on 24 June 2024; accepted on 27 June 2024
The research study delves into investigating the effects of currency devaluation on capital market performance in Nigeria using time series data from 1989 to 2021. Currency devaluation was captured using purchasing power parity and exchange rate of Nigeria domestic currency, while capital market was captured using total market capitalization of the Nigerian stock exchange with all variable serving as explanatory variables to Nigeria’s gross domestic product. Also the research employs the use of Johansen co-integration test to assess the long run relationship between all variables that are stationary at first order. Also granger causality test was adopted to determine the direction of causality between variables. The study found that exchange rate and purchasing power parity has a significant negative effect on total market capitalization in the long run. In addition, all independent variables granger cause each other as well as dependent variables. The study recommends that government should implement monetary policies that will increase the tempo of free financial flow into the capital market that will in turn stimulate economic growth and also recommended for further studies.
Purchasing power parity; Currency devaluation; Capital market and gross domestic product; Exchange rate; Nigerian stock exchange.
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