IMPACT OF FINANCIAL LIBERALIZATION ON THE EFFICIENCY OF THE NIGERIAN STOCK MARKET 1986-2011
Using Nigeria aggregate level data for 26 years: 1986-2011, the study estimates the impact of financial liberalization on stock market efficiency in Nigeria. The study used the Generalised Least Square (GLS) to estimate the four hypotheses formulated for the study. The ratio of stock market capitalization to gross domestic product, ratio value of shares traded to gross domestic product, ratio of all share index to gross domestic product, and ratio of value of shares traded to market capitalization were adopted as the dependent variables, while the independent variable was financial liberalization (percentage in foreign equity ownership). The study also controlled for some macroeconomic variables such as exchange rate, inflation rate and interest rate that might impact on the dependent variables. The results showed that the regression coefficient for financial liberalization was negative and non-significant in predicting or promoting four proxies of stock market efficiency, which supports the preposition that financial liberalization does not transform or promote stock market efficiency. Based on the results, the study recommends inter alia: promotion of favourable macroeconomic environment; formulation of policies that will reduce the impact of speculative hot money, strengthening of the legal system, stronger transparency in terms of information disclosure, the need for the establishment of effective and efficient Dispute Resolution Mechanism, the urgent need to rethink the tenure of the market; among others.