Investigating the Impact of Oil Price Volatility on Stock Market Performance in Nigeria

In recent years, the financial press, investors, policymakers, researchers, and the public have all been intrigued by the intricate and time-varying relationship between oil prices and stock markets. As a mono-product economy, Nigeria has been heavily influenced by crude oil price changes. In this paper, attempts is made to investigate the impact of oil price volatility on stock market performance in Nigeria over the period 1986 to 2024. Interest rate and inflation rate were incorporated in the model as control variables, while ARCH/GARCH 11 technique was used to generate the volatility series for oil prices. The findings, based on ARDL bound test cointegration and ECM affirmed the existence of long-run relationship among the variables as well as the short-run dynamics. The study showed that oil price volatility has a strong positive long-run effect on stock market performance, and a non-significant positive short-run effect in the short run. This implies that changes in oil prices may cause the stock market to become more volatile, which may then impact stability and economic growth. However, interest rates and inflation demonstrate significant negative relationships with stock market performance. The study offers valuable insights about the need to design effective economic management strategies to mitigate risks and ensure stock market stability and growth in Nigeria.