Monetary Policy Regimes and Stock Market Efficiency in Nigeria (2009-2019)

Abstract

In attempt to examine the relationship between monetary policy and stock market efficiency,  two proximate monetary policy regimes were chosen for the study - Sanusi’s administration (2009-2014) and Emefiele’s administration (2015-2019). Employing the multiple regression (OLS) technique reveals that money supply, interest rate, and monetary policy rate, all exert positive and marginal influence on market capitalization under Emefiele’s administration (2015 - 2019), however, under Sanusi’s administration (2009-2014), MS and INT exert significant influence on MCAP, with INT and MPR showing negative relationships, all complying with the a priori expectations. Also, considering the coefficients of determination, 99.9% and 83.0% respectively under Sanusi’s and Emefiele’s regimes, the study therefore conclude that monetary policy instruments under Sanusi’s administration were efficiently managed enough to propel the efficiency of the stock market than that of Emefiele’s administration. Therefore, the study recommended, that: government through the monetary authorities should be cautious enough to avoid discretionary policies that might hike the rate of interest; as monetary policy rate through the interest rate channel has a negative relationship with stock market prices. Also, the place of consulting predecessors in policy-making is important especially where macroeconomic growth is conceived as the overall goal to be delivered.