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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 1990 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 value of transactions and volume of transactions), while the explanatory variables include foreign direct investment net inflows, portfolio investment, net official development assistance and official aid received, trade openness, personal remittances received, value of transactions, and volume of transactions. 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 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 both value of transactions and volume of transactions on the Nigerian stock exchange. From the estimation results also, net foreign portfolio investment (FPI) and net official development assistance and official aid received exerted a negative impact on both value of transactions and volume of transactions on the Nigerian stock exchange. However, trade openness (OPN) and personal remittances received (REM) exerted a positive impact on both value of transactions and volume of transactions on the Nigerian stock exchange. 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.
