Oil Price Shocks and Stock Market Performance: A Non-Linear Approach (1986-2019)

Abstract

This study investigated the asymmetric effect of oil price shocks on stock market performance in Nigeria. Secondary data covering the period between 1986 and 2019 were employed for this study. Quarterly data of brent crude price, all share index, real exchange rate and inflation rate were sourced from Central Bank of Nigeria Statistical Bulletin ( 2019), OPEC Statistical Bulletin (various publications) and Nigerian Stock Exchange Fact Book (2019). Data collected were analysed using Non-Linear Autoregressive Distributed Lag (NARDL). The NARDL results showed that in the long run, positive oil price shocks, (t= 5.39; p<0.05) had significant positive effect on stock market performance. Negative oil price shocks (t= 5.81; p<0.05) had significant positive impact on stock market performance. In the short run, current period negative oil price shock (t= 2.01; p<0.05) exert significant positive effect on stock performance while previous period positive oil price shocks (t= 1.94; p<0.05) pose significant positive effect on stock market performance in Nigeria. The study concluded that oil price shocks is a deterrent to stock market performance in Nigeria and the impact of oil price shocks on growth rate in Nigeria is both positive and negative.