MEMORY RESPONSE OF CAPITAL MARKET PERFORMANCE TO INTEREST RATES ANNOUNCEMENT: ATHEORETICAL EVIDENCE IN NIGERIA

Despite the management of interest rates by the monetary policy authorities over these years, the performance of the capital market has not been impressive in Nigeria. The study analyzed the memory response of the capital market performance to interest rates announcement in Nigeria. The study used monetary policy rate, and deposit market rate as against market capitalization. The study sourced data from the Central Bank of Nigeria Statistical Bulletin between 1985 and 2020. The study adopted the Augmented Dickey-Fuller, and the Autoregressive Distributed Lag for the analysis. The findings showed that, deposit money rate was stationery at levels, while monetary policy rate, and market capitalization were at first differences, and no long run co-integrating equation. The theoretical evidence from the Error correction test findings revealed that, interest rates announcement did not constitute significant variables on the memory of the Nigerian capital market performance. Regular monitory and downward review of interest rates by the Nigerian monetary policy committee were recommended.