SECTORAL BUBBLES IN THE NIGERIAN EXCHANGE GROUP: EVIDENCE AND INSIGHTS

Abstract

This study investigated the existence of sectoral bubbles in the Nigeria Exchange Group using monthly data over the period 2007:M01 – 2023:M12. The study specifically examines the stock returns of six different NGX indices, namely NGX 30, NGX 50, NGX Industrial, NGX Consumer Goods, NGX Oil and Gas, and NGX Premium to detect the presence of bubbles. This collaborates with the motivation to verify the resiliency of specific sectors within the Nigerian Exchange Group in response to the contagion effects of the global financial crisis of 2007-2008, the bubble of 2012-2014, and the events of April 2017, as identified by the Central Bank of Nigeria. The research collected data from many sources, including the Central Bank of Nigeria, Nigeria Bureau of Statistics, and the Nigerian Exchange Group statistics bulletins. The research used descriptive statistics and the generalized backwards supremum augmented Dickey-Fuller (BSADF) date-stamping procedures at a 95% confidence interval to examine the data. The investigation revealed the existence of several bubbles in many indices, including NGX 30, NGX 50, NGX Industrial, NGX Consumer Goods, NGX Oil and Gas, and NGX Premium. The investigation determined that there are several bubbles present in all of the studied sectors of the Nigerian Exchange Group. Among others, the study recommended that the Nigerian Exchange Group should actively participate in investors' education. When there is increasing awareness of the dangers associated with bubbles, it will aid in preventing irrational enthusiasm. Also, investors who has higher level of education are known to be more inclined to make well-informed decisions and are less likely to contribute to the emergence of speculative bubbles.