Exchange Rate Volatility and Stock Market Performance in Nigeria: Evidence from EGARCH and TGARCH Models

This study examines the effect of exchange rate volatility on stock market performance in Nigeria over the period 2010–2025 using monthly data. Exchange rate volatility is modelled using asymmetric Generalized Autoregressive Conditional Heteroskedasticity (EGARCH and TGARCH) techniques, while its effect on stock market returns is analysed within a multivariate regression framework including oil prices and inflation.
The results show strong persistence in exchange rate volatility, with the EGARCH model yielding a GARCH coefficient of 0.9754 (p < 0.001) and the TGARCH model confirming significant persistence (β = 0.6468, p < 0.001). No significant asymmetric effect is observed (γ = 0.1876, p = 0.4580). Regression results indicate that exchange rate volatility does not significantly affect stock market returns (β = 0.1162, p = 0.111), while crude oil prices exert a positive and significant effect (β = 0.2003, p < 0.001). Inflation is found to be insignificant, and the model explains 9.6% of the variation in stock returns (R² = 0.096).
The findings suggest that exchange rate volatility influences the Nigerian economy mainly through uncertainty effects rather than direct stock market transmission. The study highlights the dominance of oil price movements in shaping stock market performance and provides policy insights on exchange rate stability and macroeconomic resilience.

Exchange rate volatility; Stock market performance; EGARCH; TGARCH; Nigeria.

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