ABSTRACT

The focus of this study was to empirically ascertain the linkage between financial openness and stock market development in Nigeria for the period spanning 2000 to 2022, using annual data set extracted from the World Bank database and Central Bank Annual Statistical Bulletin. The dependent variable was stock market development (proxied by market capitalisation), while the explanatory variables include foreign direct investment net inflows, foreign portfolio investment and exchange rate. The method of analysis adopted in accomplishing the specific objectives of this study was the Fully Modified Ordinary Least Squares (FMOLS) method and other preliminary test like descriptive statistics, correlation analysis, test for stationarity, cointegration test and augmented Dickey Fuller Stationarity. The various principal findings from the FMOLS estimation procedure revealed that; foreign direct investment net inflows (FDI) exerted a negative impact on market capitalisation, net foreign portfolio investment (FPI) also exerted a negative impact on market capitalisation and Exchange rate also exerted a negative impact on market capitalisation. Arising from the study’s key empirical findings, this study recommended that Nigeria should make coordinated attempts to strengthen the current legal and institutional framework of economic relations with their trading partners, as this will not only help to uncover the country's fortunes, but will also help distribute wealth within each sector and state of the federation, thereby reducing hardship and making easier for Nigerians to reap the rewards from foreign direct investment and foreign portfolio investment inflows through stock market development in Nigeria.