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STOCK MARKET DEVELOPMENT AND FOREIGN DIRECT INVESTMENT
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This study examined the impact of stock market development on foreign direct investment inflow to Nigeria using secondary time series data from 1981 to 2019. The study employed the Augmented Dickey Fuller unit root test, Granger causality test, Johansen co-integration test and Error correction model regression. The results of Granger causality revealed that while uni-directional causality was found running from each of stock market capitalization ratio and Turnover ratio respectively to Foreign direct investment inflow, Bi-directional causality was found between total value of stocks traded ratio and Foreign direct investment inflow. Error correction model regression revealed that stock market capitalization ratio, Turnover ratio and total value of stocks traded ratio respectively have a negative and statistically insignificant impact on Foreign direct investment inflow in Nigeria amongst other findings. The study recommends based on its findings that urgent and appropriately sequenced stock market reforms be undertaken so as to reverse the adverse effects of stock market development indicators on FDI inflow. Further increased financial openness of the Nigeria economy should be promoted as part of financial liberalization reforms so as to attract quality firms to the Nigeria stock exchange.
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... The Stock Exchange development has a positive influence on growth of FDI (Olasukanmi, 2009).There is a positive and statistically a strong relationship between FDI and market capitalization which showed the important role of FDI in the stock market development of Pakistan(Shabaz, Ahmad and Ali, 2008). ...
The objective of this research paper is to examine the effects of various factors like violence, stock exchange performance and exchange rate on Foreign Direct Investment (FDI) inflow into Pakistan. For econometric analysis monthly secondary data ranging from 2003 to 2011 has been used. Regression and correlation are used as analytical tools for the empirical estimation. In addition, for time series data analysis Augmented Dickey Fuller test and Phillips-Perron test have been used. This study finds that the violence in the country and Karachi Stock Exchange- 100 Index are statistically significant factors with a positive sign. Moreover, the exchange rate has also been found to be statistically significant factor with negative sign. This study uses monthly time series data from 2003-2001, which enables a deeper understanding of FDI inflow in Pakistan. Results suggest that in order to enhance FDI inflow to a desirable level, the government should ensure the existence of a peaceful environment, efficient capital markets and a stable exchange rate in the country.
This paper investigates the impact of Foreign Direct Investment (FDI) and stock market development on growth in Nigeria, for the period 1980-2009. The paper is imperative for policy makers to determine the trend of foreign direct investment and stock market development as well as the exert relationship that exists among foreign direct investment, stock market development and economic growth in Nigeria. The paper employs econometric techniques such as Unit Root test, Cointegration and Error Correction Mechanism. The results show that both foreign direct investment, its lagged and lagged stock market development have small, and a statistically significant effect on economic growth. The results seem to support the argument that extractive FDI and stock market development were growth enhancing. But the trends results show that both FDI and stock market development have cyclical movement. Finally, the results show that lagged exchange rate has positive effect on growth. These findings suggest that exchange rate appreciation enhance growth in Nigeria and there is need for more investment in these markets.
This paper is primarily designed to examine the nature of the relationship existing between stock market development and the level of investment flows in a country with a high degree of macroeconomic instability; and whether the stock market plays a uniform role in attracting both domestic and foreign investments in such economic situation. Extrpoloted macroeconomic quarterly data (over a period from 1970 to 2006) are used in the analysis. The Johansen Cointegration model is adopted to examine the long-run trends in the variables. While controlling for other variables, a vector error correction model (VERCM) is used in estimating the relationship between investment growth, on one hand, and stock market development on the other. The study shows that development in the Nigerian stock market over the years was able to spur growth in domestic private investment flows, but unable to do so in the case of foreign private investment; and that development in the country's banking system rather had some distabilising effects on the flow of private investments. The researchers attributed this to persistent cases of distress and failure in the banking system. This study is among the few of its kind to have empirically sort for and established some discriminant effects of stock market development in the flow of domestic and foreign private investments, at least from the point of view of a constrained market economy.
Impact of financial liberalization on the development of the nigeria capital market (1984-2014) Unpublished B.Sc. (Economics) Dissertation. Department of Economics, Accounting and Finance
- C Amagwu
Amagwu, C.A (2016). Impact of financial liberalization on the development of the nigeria capital
market (1984-2014) Unpublished B.Sc. (Economics) Dissertation. Department of Economics,
Accounting and Finance, Bells University of Technology, Ota, Ogun State, Nigeria.
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Omodero, C. O., & M. C. Ekwe (2017). Impact of Foreign Direct Investment (Fdi) On the Stock
Market Performances in Nigeria (1985-2014). Applied Finance and Accounting, 3(1), 36-48.
Foreign direct investment to Africa maintains momentum sustained by intra-African flows
- Unctad
UNCTAD (2014). Foreign direct investment to Africa maintains momentum sustained by intra-African flows, UNCTAD Report reveals. Accessed 2 January 2018. [online]
<http://unctad.org/en/pages/PressRelease.aspx?OriginalVersionID=189>