Effect of Macroeconomic Shocks on Stock Market Performance in Nigeria Between (2000q1 - 2024q4)

Abstract

Macroeconomic indicators are essential tools for assessing the health of an economy and guiding economic governance. These indicators, such as economic growth, inflation rate, returns on equity, exchange rate, and interest rate among others are used by policymakers to make informed decant by citizens to evaluate the performance of their leaders. The study examines the effect of macroeconomic shocks on stock market performance in Nigeria between 2000q1 and 2024q4 using Structural VAR model. The unit root test shows that all share index, money supply, exchange rate and inflation rate are stationary at first difference while interest rate is stationery at level. The impulse response function shows that exchange rate transmits negative shock to all share index in Nigeria. Inflation rate transmits positive shock to all share index in Nigeria. Interest rate transmits negative shock to all share index in Nigeria. Money supply transmits positive shock to all share index in Nigeria. The study concludes that macroeconomic shocks play a significant role in shaping stock market performance in Nigeria. The direction and magnitude of these effects underscore the importance of macroeconomic stability. The study recommends that Central Bank of Nigeria (CBN) should improving foreign exchange supply, diversifying export earnings, and reducing import dependence will help mitigate currency volatility and strengthen investor confidence in the capital market and Central Bank of Nigeria (CBN) should ensure adequate liquidity in the financial system, especially during periods of economic downturn, to support capital market activities.