Macroeconomic Determinants of Stock Market Performance in Nigeria: Evidence From GDP Growth, Inflation, and Interest Rates

This study investigates the macroeconomic determinants of stock market performance in Nigeria, focusing on GDP growth, inflation, and interest rates, using monthly data from January 2000 to December 2024. The persistent volatility of Nigeria’s equity market and its apparent disconnection from real economic activity motivate this analysis. Employing the Autoregressive Distributed Lag (ARDL) bounds testing approach, the research captures both long-run equilibrium relationships and short-run dynamics, while incorporating threshold regression techniques to address nonlinear inflation effects. The logarithm of the All-Share Index serves as the primary proxy for stock market performance, with robustness checks utilising alternative measures. The findings indicate a stable long-run cointegrating relationship among the variables: GDP growth exerts a positive, statistically significant effect, affirming the pivotal role of real economic activity in long-term equity valuation. Inflation has a negative impact, with threshold analysis revealing a critical rate of approximately 15.2%, beyond which adverse effects intensify due to increased uncertainty and diminished real returns. Interest rates demonstrate a significant short-run negative effect, highlighting rapid market repricing in response to monetary policy shifts. Diagnostic and stability tests confirm the robustness of these results. Overall, the study underscores that while Nigeria’s stock market reflects long-run economic growth, its performance is highly susceptible to macroeconomic instability, emphasising the need for effective inflation control and coordinated macroeconomic policies for sustainable capital market development