An appraisal of financial market reforms’ effects on economic stability in Nigeria: A study of the Nigerian Stock Exchange (2000–2020)
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Background of the Study :
Financial market reforms are essential for enhancing economic stability by improving market transparency, efficiency, and investor confidence. In Nigeria, the Nigerian Stock Exchange (NSE) has undergone significant reforms aimed at modernizing its operations and strengthening regulatory oversight. Initiatives such as advanced trading technologies, enhanced disclosure requirements, and rigorous market surveillance have been introduced to mitigate systemic risks and attract investments (Okoro, 2023). Over the period from 2000 to 2020, these reforms have contributed to increased market liquidity and improved risk management practices. However, persistent challenges—such as market volatility, regulatory uncertainties, and external economic shocks—continue to threaten overall financial stability. This study appraises the effects of these financial market reforms on economic stability by analyzing key performance indicators including market capitalization, trading volumes, and investor sentiment. It also examines how external factors and global economic trends interact with domestic reforms to influence the resilience of Nigeria’s financial system (Balogun, 2024; Eze, 2025).
Statement of the Problem
Despite extensive financial market reforms, Nigeria’s economic stability remains fragile. The NSE, although modernized, still experiences significant fluctuations driven by both internal regulatory gaps and external economic uncertainties. Such volatility undermines investor confidence and disrupts long-term economic planning. The disjunction between the reform initiatives and the actual market outcomes necessitates a critical evaluation of these measures. This study seeks to identify the constraints that limit the effectiveness of financial market reforms and to assess their overall impact on economic stability. Addressing these issues is crucial for developing more robust regulatory frameworks that can safeguard the economy against market shocks and promote sustainable growth (Uche, 2023; Akin, 2024).
Objectives of the Study:
1. To assess the impact of financial market reforms on economic stability in Nigeria.
2. To evaluate the effectiveness of reforms implemented at the NSE.
3. To recommend strategies for enhancing market stability and investor confidence.
Research Questions:
1. How have financial market reforms affected economic stability in Nigeria?
2. What are the key challenges faced by the NSE in achieving stability?
3. How can regulatory frameworks be improved to foster a more stable financial market?
Research Hypotheses:
1. H1: Financial market reforms have a positive impact on economic stability.
2. H2: Regulatory improvements significantly enhance market performance.
3. H3: External economic shocks moderate the impact of financial market reforms on stability.
Significance of the Study (100 words):
This study examines the effects of financial market reforms on Nigeria’s economic stability with a focus on the NSE. Its findings offer valuable insights for policymakers, regulators, and investors, informing future reforms and strategies to strengthen market resilience. By addressing the challenges of volatility and regulatory gaps, the research contributes to the development of a more stable and robust financial system, ultimately supporting sustained economic growth (Chukwu, 2023).
Scope and Limitations of the Study:
The study is limited to assessing financial market reforms and their effects on economic stability, focusing exclusively on the Nigerian Stock Exchange and related financial indicators.
Definitions of Terms:
1. Financial Market Reforms: Regulatory and structural changes aimed at improving market efficiency and stability.
2. Economic Stability: The condition of an economy characterized by steady growth, low inflation, and minimal volatility.
3. Nigerian Stock Exchange (NSE): The principal securities exchange in Nigeria where stocks and other financial instruments are traded.
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