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Most studies conducted on the determinants of stock price movements in Nigeria have been done on theoretical
basis with no quantitative empirical evidence to support their postulations. Consequently, this study examined
the macroeconomic determinants of stock price movements in Nigeria using detailed econometric framework in
order to provide the foundation for evidence-based policies. Both the long-run and short run dynamic
relationships between the stock price movement and the macroeconomic variables were analyzed with time
series data that spanned from 1985 to 2010 using the Engle-Granger two-step cointegration test. We established
that there is no cointegration between the variables, indicating the absence of long run relationship. Results of
the regression indicate that the monetary policy variables (real exchange rate, real interest rate and money supply)
as well as political instability are not the determinants of stock price movements in Nigeria; however, inflation
was found to be a major determinant of stock price movements. The study recommends that the monetary
authorities (that is the Central Bank of Nigeria, CBN) and policy makers should pay attention to changes in
money supply and inflation in view of their sensitivity to stock price movements in Nigeria.
