Economic and Financial Review


Central Bank of Nigeria


Market liquidity, Capital market, Market efficiency, Market performance


The study developed a spectrum of indicative measures of capital market liquidity using Nigerian monthly stock market indices for the period January 2000 — June 2014. If identified four broad measures of liquidity common in the literature transaction cost, volume price and market impact measures. Based on these three sub-measures of market efficiency coefficient, variance ratio, turnover ratio and illiquidity index were developed based on data availability and other market factors specific to the Nigerian environment. The study examined the impact of capital market liquidity on asset price returns. using a vector auto regression [VAR] model which showed that the Nigerian capital market was illiquid during the review period. While the result indicated the existence of a Jong-run relationship between stock market returns and liquidity. evidence from both the short-run and long-run causality indicated unidirectional relationship between stock market returns and turnover ratio, with no feedback effect. The generalised impulse response function indicated that response of market liquidity to asset price returns is stronger than the response of asset price returns to market liquidity. The result is consistent with the behaviour of an illiquid market.

Author Bio

The authors are staff of the Monetary Policy Department, Central Bank of Nigeria.

Publication Title

CBN Economic and Financial Review





Recommended Citation

Tule M., Ogiji, P., Ndako, U. B., Ujunwa, A., Jimoh, S. L., lhediwa, C. E. & Afiemo, O. O. (2015). Measuring the depth of liquidity and efficiency of the Nigerian capital market, CBN Economic and Financial Review. 52(4), 31-54.



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