IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 3 NO. 2 2018

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Empirical Examination of Foreign Direct Investment and Stock Market Performance in Nigeria

Oka Felix Arikpo & Anthony Ogar

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Abstract

This study examined foreign direct investment and capital market development in Nigeria for the period 1972 to 2016. The study was specifically designed to assess the relationship between foreign direct investment and market capitalization, foreign direct investment and number of listed companies, foreign direct investment and all share index, foreign direct investment and turnover ratio and foreign direct investment and value of transaction FDI in Nigeria. Secondary time series data were collected using desk survey approach and analysed using Vector Auto Regression (VAR) method. The result of the analysis revealed that there is a significant positive relationship between foreign direct investment and market capitalization; also, there is a significant positive relationship between foreign direct investment and number of listed companies; again, the study shows that foreign direct investment has a significant positive relationship with all share index; lastly it was revealed that foreign direct investment has a significant positive relationship with turnover ratio and value of transaction in Nigeria. On the basis of these findings, the study recommended that Government should put in place suitable investment conditions such as steady power supply, good road networks, etc. for the profitable operation of foreign direct investment and to boost the capital market performance in Nigeria; also, government should encourage foreign direct investors to quote their securities on the Nigerian capital market by providing special benefits such as tax holidays, to quoted FDI and finally, regulatory authorities should make policies to boost investors’ confidence in the market by promoting transparency, fair trading and discouraging capital fright.

keywords:

Foreign Direct Investment, Capital market, Market Capitalization, Turnover Ratio, All Share Index, Value of Transaction, Foreign Portfolio Investment

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