ABSTRACT

The study examined the effect of foreign portfolio investments on stock market performance in Nigeria. Annual time-series data for the study were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin as well as stock market bulletin for the period 1990 - 2017. All Share Index (ASI) was used as proxy for stock market performance (dependent variable) while Foreign Portfolio Investment Inflow (FPII), Foreign Portfolio Investment outflow (FPIO) and Net Portfolio Investment (NPI) were used as proxies for independent variables. Time series properties of the variables were examined using Augmented Dickey Fuller tests. Multiple regression analysis based on Autoregressive Distributed Lag (ARDL) approach was used to analyze the data. The study revealed that foreign portfolio investment has significant effect on Nigeria stock market performance within the study period. The study recommends that the federal government of Nigeria should through the Securities and Exchange Commission enhance stability of the Nigerian stock market by diversification and encouragement of investments into futures and forward contracts in order to boost the inflow of foreign investments and stock performance. Effectiveness and efficiency should be further encouraged in the Nigerian stock market activities in order to attract more inflow of foreign portfolio investment other than outflow and boost balance in the net foreign investment margin. The federal government should put in place favorable conditions such as terrorism, political instability, bad road, inconsistence power supply, sovereign exchange risk among others; in order to encourage foreign investors to invest into the economy and discourage outflows so as to enhance stock market performance in Nigeria.