Effect of Money Supply on the Stock Market Returns in Nigeria
1CHUDE, N.P. AND 2CHUDE D.I.
1Department of Banking and Finance, Anambra State University, Igbariam Campus
2Department of Accountancy, Anambra State University, Igbariam Campus.
E-mail: nkypat8@yahoo.com
ABSTRACT
The relationship between broad money supply (M2) and stock market returns in Nigeria has been a great concern in any economy. Capital market is the part of the financial market that provides facilities for transfer of medium and long-term funds to various economic units. The aim of this study is to investigate the effect of broad money supply on the stock market returns in Nigeria. Stationary test, co-integration test and error correction model were used as a model. It was discovered that there is long run relationship between broad money supply and stock market returns in Nigeria and that broad money supply has been relatively high over the years and has significant positive impact on the stock market returns in Nigeria. The study recommended that Government should provide policies that will encourage broad money supply and also provide incentives to the various multinational corporations in oil and gas as well as telecommunication industry to list their shares towards enhancing the all share index. This will enhance the contribution of the capital market to the economic growth of the country’s economy.