SJIF Impact Factor: 6.093 Volume: 4 | Issue: 5 | May| 2019 ISSN: 2455-7838(Online) EPRA International Journal of Research and Development (IJRD) Peer Reviewed Journal MONETARY POLICY AND STOCK MARKET PERFORMANCE IN NIGERIA 1 Osakwe, A. C. 1 Banking and Finance Dept, Chukwuemeka Odumegwu Ojukwu University, Igbariam Campus. 2 Chukwunulu, J.I. 2 Banking and Finance Dept, Chukwuemeka Odumegwu Ojukwu University, Igbariam Campus. ABSTRACT The study examined the effect of monetary policy on stock market performance in Nigeria. It employed intermediate monetary policy targets as proxies for monetary policies of the Central Bank of Nigeria and All Share Index as proxy for stock market performance. Monetary policy variables include money supply, interest rate and exchange rate all of which were obtained from the CBN statistical bulletin. The time frame covered 1986 to 2015. Statistical analysis employed was OLS regression technique. The results showed that money supply and exchange rate fluctuation have significant positive effect on stock market price movement, while Interest rate has insignificant negative effect on stock market price movement. On the overall, the results show that monetary policy variables significantly determine 94% of the stock market performance movements in Nigeria. The study posits that monetary policy has a very high determining influence on stock market performance which implies that monetary policy can be used to control stock market activities in Nigeria. It thus recommends, among others that the monetary authorities should make information relevant for securities available to the stock market participants and also make sure the transparency and accountability of audit reports. KEY WORDS: Monetary Policy, Stock Market, Broad Money Supply, Interest Rates, Exchange Rate INTRODUCTION A good number of developing economies have joined the developed world in recognising the usefulness and importance of stock market in improving the quality and efficiency of domestic financial system. With the exposure of local markets to the international community, the global capital market has become inevitable. Thus economies crave for development stock so as to enhance its growth. This attracted the attention of many researchers to investigate the variables affecting stock markets (Aliyu, 2009). Monetary policy is one of the economic tools used mostly by central banks to influence economic variables such as GDP, industrial production index, consumer price index, exchange rate or the inflation rate. One of the most popular monetary tools applied by central bank is to alter the short term interest rate to achieve the macroeconomic goals of government. Fama’s (1981) Efficient Market Hypothesis (EMH), states that investors should know, all the necessary or relevant information regarding their investment and also about profit maximizing and the macroeconomic variables which might lead to a supernatural earning. This clearly indicates that stock price actually reflects the shocks from Volume: 4 | Issue: 5 | May| 2019 | www.eprajournals.com |58 |