IMPACT OF FINANCIAL GLOBALIZATION ON STOCK MARKET DEVELOPMENT IN NIGERIA
Keywords:
Financial-Globalization, Stock-Market, DevelopmentAbstract
With the current wave of globalization, it will be difficult for a country’s financial market to be
insulated against the vagaries of the globalized financial system. This study therefore examined the
impact of financial globalization on the development of the Nigerian stock market. The impact of
financial globalization is captured in terms of degree of trade openness, foreign direct investment
inflow, foreign portfolio investment inflow, external public debt, and exchange rate. Stock market
development is measured in terms of stock market capitalization as a ratio of gross domestic product
(GDP). Annual time-series data from 1981 to 2023 were used for the study. The data were obtained
from secondary sources including the Central Bank of Nigeria (CBN) annual statistical bulletin for
2023, the CBN annual reports and statements of accounts (various years), and the World Bank
Development Indicators (various years). The autoregressive distributed lag (ARDL) model, error
correction model (ECM), and Granger causality test were used to estimate the data. The major
findings from the study indicated that degree of trade openness has insignificant negative impact
on stock market development; foreign direct investment inflow has insignificant positive impact on
stock market development; foreign portfolio investment inflow has significant positive impact on
stock market development while external public debt and exchange rate have significant negative
impact on stock market development. The study concludes that financial globalization, especially
when measured in terms of foreign portfolio investment, external pubic debt, and exchange rate,
significantly affects the development of the Nigerian stock market. Among other things, it is
recommended that innovative financial instruments should be introduced to the Nigerian stock
market so as to increase its global competitiveness and to attract foreign investors.
Keywords: Financial-Globalization, Stock-Market, Developmen