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Abstract

This study examined the relationship between Naira Exchange Rates and assets prices in Nigeria, using time series data from 1987 – 2020. The general purpose was to examine the relationship between exchange rate liberalization and assets prices in Nigeria stock market while the specific purposes are: to examine the influence of Naira exchange against US Dollar, against British Pounds Sterling, against Japanese Yuen and against Chinese Yuen on Nigerian Nigeria all share price index. Time series data was sourced from Central Bank of Nigerian Statistical Bulletin. All share price index was used as dependent variable while Naira exchange rate against United States Dollar, Nigerian Exchange Rate against British Pounds US Dollar, Naira Exchange Rate and Naira Exchange Rate against Japanese Yuen. Multiple linear regressions with econometric view were used as data analysis technique. The study employed the properties of Ordinary Least Square such as Co-integration, Augmented Dickey Fuller Unit Root, Granger Causality Test and Vector Error Correction Models. R2, Beta coefficient, T-statistics and Durbin Watson were used to determine the dynamic relationship between the dependent and the independent variables. The result shows 76% variation in Nigerian all share price index while the remaining 24% is traceable to exogenous variables not captured in the model. The regression coefficient proved that Nigeria exchange rate against US Dollar have negative and significant effect on Nigerian all share price index while exchange rate against the British Pounds sterling and the Japanese Yuan have positive and significant relationship with Nigerian all share price index. The ADF results shows that the variables are all integrated at first difference, the granger causality indicates bi-variant relationship running from the independent and dependent variables and independent to dependent. The Johansen Co-integration Test proved no long run relationship between the dependent and the independent variables. From the regression summary, the study concludes that there is significant relationship between Naira exchange rate against the currencies and asset prices. The study recommends that the monetary authority should devise measures of managing the depreciating naira exchange rate against Dollar.