Analysis of the Effect of Cross Border Investments on the Nigerian Capital Market

Abstract

This dissertation discussed the Analysis of effect of Cross Border Investment on the Nigeria Capital Market between the period 1980-2018.  In order to realize the research objectives, secondary data on Market capitalization of the Nigeria Capital Market obtained from CBN Statistical Bulletin, International Monetary Fund (IMF) and National Bureau of Statistics (NBS) were used to investigate the research. The Error Correction Econometrics Model was used in the estimation using Stata 15 Econometrics package. The findings of this research showed that a positive and significant relationship exists between Market Capitalization in the Nigerian Capital Market and Foreign Portfolio Investment while a negative and significant relationship exists between market capitalization, degree of openness and exchange rate. A change in Foreign Portfolio Investment will cause an increase in Market Capitalization and a change in degree of openness of the economy and exchange rate will cause a decrease in Market Capitalization. Based on these findings, the study proffers the following recommendations: that intensive effort should be made by policy makers to create conducive environment that will attract more foreign investment into our capital market which will increase the level of investment and economic growth in Nigeria. Monetary and Fiscal policy measures that will keep the naira exchange rate low and stabilise the financial sector should be instituted to boost market capitalization and investment in Nigeria. Government policies on trade liberalization should be regulated to achieve favourable terms of trade that will enhance growth.