MONTHLY STOCK MARKET VOLATILITY ON ECONOMIC GROWTH IN NIGERIA

Numerous empirical studies conducted on stock market volatility on economic growth specifically in Nigeria reported diverse results. Despite government policy reforms to strengthen the stock market the negative impact of stock market volatility on economic growth still lingers in Nigeria. In a bid to examine the cause of the volatility and proffer recommended solution, this study examines monthly stock market volatility on economic growth in Nigeria from January 1999-December 2017. Through the varieties of first-order volatility models of Autoregressive Conditional Heteroscedasticity (ARCH) and its extensions, Generalized ARCH (GARCH) which most studies in Nigeria ignore and only but a few attempt to use on annualized time – series stock market return data. The Zivot-Andrew test was conducted to ascertain the stationarity properties of the dataset and its structural breaks. The findings of this study report the presence of high monthly market volatility clustering diminishing economic growth and was responsible for instigating the 2015-2017 economic and financial recession in Nigeria. Stock market volatility in Nigeria is influenced by economic, financial and political instability of the past months and years than the present. Thus, a unite increase in stock market volatility decreases economic growth vis-à-vis a unit decrease in stock market volatility. The results also report the absence of leverage effect in Nigeria. The policy considerations are the government, policymakers, and financial regulators, supervisors, and investors must embrace macroeconomic and non-macroeconomic factors of political instability, insecurity among others into policy formulation and implementation along with portfolio restructuring and diversification enhance economic stability and investor confidence to invest. This study also recommends the review of orthodox and unconventional economic and financial policies diminishing economic growth and financial sector stability in Nigeria