Impact of Global Financial Crisis on Nigerian Stock Market

Abstract

The purpose of this study is to investigate the impact of the global financial crisis on the Nigerian stock market. To achieve this purpose, research questions were raised, hypotheses were formulated and a review of extant literature was made. The survey method of research design was adopted in an effort to generate the required data for the study. The data generated were analyzed using the regression model and our result shows that the global financial crisis measured by currency crisis, credit crisis, liquidity crisis, and foreign investment crisis has a negative significant impact on the Nigerian stock market. Based on our findings, we recommended that mergers and acquisition should be encouraged so as to increase the capital base of stock market participants. With this arrangement, stock market participants will be able to absolve shocks from economic meltdown; the government should implement discriminatory income tax policy for companies quoted in the Nigerian stock market. This is to motivate them participate in the stock exchange market; and the Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC), and other relevant regulatory authorities should use the financial stress index (FSI) as proposed by IIIing and Liu (2006) to indicate early signals of financial crisis and guiding against such early enough.

Key words: Global financial crisis, Nigerian stock market, currency crisis, credit crisis,
liquidity crisis, and foreign investment crisis.