ABSTRACT

This study examined the effect of Central Bank of Nigeria's (CBN) regulation on stock market perfonnance, The objectives were first to examine the causal relationship between open market operations and all share index of Nigerian stock market. Secondly, to assess the effect of monetary policy instruments on all share index of the Nigerian stock market. Thirdly to investigate the relationship between open market operation and market capitalization of Nigerian stock market. Finally to evaluate the Causality from monetary policy instruments to market capitalization of Nigerian stock market. The study adopted the ex-post facto research design. The scope of the study covers from 1986 to 2014. Secondary data sourced from Central bank of Nigeria statistical bulletin 2014, Central bank of Nigeria online Database, and Nigerian Capital market bulletin 2014 were used. Johansen co-integration. vector error correction model. and wald test were used to estimate the extent of long and short run causal relationship between the Central bank of Nigeria regulation on stock market performance. Ihese analysis were conducted using econometrics views (E-view) version 8.0 statistical package. The results indicate that firstly, there is significant long and short run causality from Central Bank of Nigeria open market operations to all share index of Nigerian stock market. Secondly there is significant long and short run causality from Central bank of Nigeria policy rates to all share index of Nigerian stock market. Thirdly, there is a short run but no long run relationship between Central bank of Nigeria open market operations and market capitalization of Nigerian stock market. Finally, the study could not establish a significant long or short run relationship between Central Bank of Nigeria policy rates and market capitalization of Nigerian stock market. From these results, it seems obvious that the Central Bank of Nigeria (CBN) regulation affects the perfonnance of the Nigerian stock market. The study recommended among other things that the apex regulatory financial institution monitor the activities of the stock market in order to achieve stability and maintain development over the long run. We equally recommended the use of these policy rates, that is monetary policy rate, cash rec:v ratio, lending rate, and interest rate as tools to influence the share prices; therehy attracting more investors.