Unlocking Nigeria’s Economic Potential: The Impact of Financial Openness on Stock Market Growth

Abstract In Nigeria, despite the long existence of the stock market, its poor level of development remains a concern. Financial openness may aid the development of Nigeria’s stock market, especially with regard to increasing foreign participation in the market. The growth of financial activity, especially the banking sector, is dependent on external financial openness. This study examines how financial openness influences Nigeria’s stock market. A descriptive statistics test, correlation analysis, stationarity test and co-integration test were carried out and to analyse the model, the autoregressive distributed lag (ARDL) regression method was employed. The study covered a time period of 37 years from 1984 to 2020. The Findings reveal that financial openness has a significant impact on Nigerian stock market development. To preserve foreign portfolio investment, the study proposes increased openness incentives to increase international stock market involvement. The study recommends that favourable investment policies by the government should be created to stimulate foreign participation.