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COVID-19 PANDEMIC AND NIGERIAN STOCK MARKET CAPITALISATION

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Ilorin Journal of Economic Policy Special Issue Vol.7, No.3: 12-23, 2020

COVID-19 PANDEMIC AND NIGERIAN STOCK MARKET CAPITALISATION

Muyiwa Ezekiel Alade*1, Sunday Amos Adeusi2 & Fisayo Oluwatoyin Alade3
1,2
Department of Accounting, Adekunle Ajasin University, Ondo State, Nigeria
3
Centre for Ecological and Environmental Research, Management and Studies, Kwara State
University, Malete, Kwara State, Nigeria

*Corresponding author’s email:eze.alade@gmail.com

Abstract
This study investigates the connection between COVID-19 confirmed cases and Nigerian stock market
capitalisation. Daily recorded secondary data that cover a 3-month period covering 1 March to 31
May 2020 were sourced from the Nigerian Stock Exchange, Nigeria Centre for Disease Control and
World Health Organisation websites. Vector regression model was employed for statistical analysis.
The results show that the confirmed cases of COVID-19 have mixed association with the Nigerian
stock market equity capitalisation, while the global announced confirmed cases demonstrate inverse
relationship with the market capitalisation but are both statistically insignificant at 0.05 level. The
implication is that, plausible severity of global health concern on emerging stock market can be
waned if prompt precautionary measures are deployed. The study put forward the need for proactive
media programmes by the government and the stock market leadership, capable of deterring sudden
short-run effect of such unprecedented global health crises on sustainable growth of the capital
market due to abrupt exit and/or restricted activities of the foreign investors and other stock market
participants.
Keywords: Confirmed cases, COVID-19, Market capitalisation, Pandemic, Stock Market
JEL Classification: F02, G01, G14

Introduction
Stock market is a well regulated market established not only to serve as a meeting point
platform for the highly liquid and insolvent (potential) investors, but to also support national
economy growth and development. In line with the existing theories, the stock market thrives
on information. As well-structured the market is positioned, it is not insulated from or
immune against arrival of information of different kinds (Sun & He, 2012; Gerding, 2005;
Kowalewski & Śpiewanowski, 2020), capable of defining or redefining its values consistent
with efficient market hypothesis. For instance, Al-Awadhi, Al-Saifi, Al-Awadhi and
Alhamadi (2020) identify some of the major occurrences that stock market returns respond to
which include disaster, sports, news, environmental issues, development in politics and
outbreak of epidemics. Others include corporate governance issues, and accounting
information (Alade, 2018). Suffice to say therefore that the stock market thrives on
heterogeneous information (endogenic or exogenic in nature) that can influence the market
participants’ and its stakeholders’ decision about the market activities.
Apparently, the outbreak of Coronavirus popularly referred to as COVID-19 has had its toll
on global stock markets (Lopatta, Alexander, Gastone & Tammen, 2020; Barro, Ursúa, &
Weng, 2020), among other spheres of life. But, the link between COVID-19 confirmed cases
(within an economy, a region and globally) and the Nigerian stock market capitalisation calls
for empirical investigation and confirmation. However, apart from immediate effect recorded
around the early stage of the pandemic, its short or long run impact on stock market
12
COVID-19 Pandemic ……….. Alade

performance in Nigeria is vague. According to Alfaro, Chari, Greenland and Schott (2020), in
case the course of the pandemic becomes less serious than anticipated, there is likelihood that
the stock market will rebound as the confirmed cases continue to rise.
It is indisputable that the idiosyncratic nature of the unprecedented novel Coronavirus
outbreak and its implication on global economy as well as stock markets is distinct compare
to previous experienced economic crises (Ding, Levine, Lin & Xie, 2020; Tashanova,
Sekerbay, Chen, Luo, Zhao & Zhang, 2020). According to Davis and Anderson (2008), the
AIDS pandemic is the largest public health crisis in contemporary history, and the
consequences of inaction range from the highly personal to problems of national security and
economic development.
The sudden emergence of COVID-19 in December 2019 from Wuhan, China which was
declared pandemic and Public Health Emergency of International Concern (PHEIC) in March
11, 2020 by the World Health Organisation has made history. The pandemic is characterised
with quick spread, but less deadly than other viruses. The COVID-19 related first death was
recorded in January 11, 2020 and still counting. Based on WHO statistics, about 5,934,936
and 100,610 cases have been confirmed globally and in Africa respectively with 367,166 and
2,554 deaths in that order as at May 31, 2020. Realities have defiled past predictions
regarding likely total number of the COVID-19 cases and fatality, suggesting unpredictable
rise in the future days. Probable impact of such PHEIC on global and/or regional stock
markets is inevitable. But, the severity might not be similar to other outbreaks. In the past
decade, 2009 Swine flu, 2014 polio, 2014 Ebola outbreak, Zika virus epidemic and the
current COVID-19 among other epidemic and pandemic have been declared PHEIC. In the
earlier decades, HIV/AIDS was declared a pandemic (Davis & Anderson, 2008).
One of the consequences of globalization is that a nation (state) becomes too big to solve the
small problems and too small to solve the big ones. In this age of strong global integration,
arguably a declared PHEIC would have a consequential effect on stock market performance.
This is owing to the fact that a declared pandemic or epidemic would always come with
accompanied trade restriction orders, capable of inflicting direct and indirect effects on the
capital market. According to Tashanova et al. (2020), and Kowalewski and Śpiewanowski
(2020), COVID-19 has affected the global market negatively, although the impact may differ
from one economy, firm or sector to the other.
As some companies are experiencing a boom, others are faced with retardation in operations,
thereby affecting their performances. For instance, the US stock market lost about 30% of its
market value between late February and middle of March 2020 to the coronavirus crisis
(Alfaro, Chari, Greenland & Schott, 2020; Ding et al., 2020). At the European stock markets,
the scourge of the pandemic was also felt as it aroused a series of market dynamics (Ibikunle
& Rzayev, 2020). According to Ding et al. (2020), there was a sharp fall in S&P by 34% as
well as noteworthy decline of 46%, 42%, 31% and 25% in Brazil, Italy, Japan and Hong
Kong exchanges all in the 2020 first quarter. In Nigeria, the Nigerian stock market equity
capitalisation declined from about N13.5 trillion in March 1 to as low as approximately
N10.8 trillion in April 6, 2020.
In the event of sporadic widespread of COVID-19 with a distinct pathology unlike earlier
pandemics such as 1918-1920 Spanish flu (Barro et al., 2020), HIV/AIDS, SARS, MERS and
Ebola, economic and stock market crises become imminent. This might be because of lack of
(or skewed) new investment opportunities open to the investors accompanying unprecedented
outbreak of the novel pandemic according to Tashanova et al. (2020). Shive (2010) posits

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Ilorin Journal of Economic Policy Special Issue Vol.7, No.3: 12-23, 2020

further that measure of the rate at which disease is transmitted and rumours through social
contact, is capable of predicting individual investor trading for instance in Finland.
The NSE, as an emerging stock market, has been noted as one of the leading performing
stock exchange markets, and the second largest financial centre in the sub-Saharan Africa in
2015. Certainly, the market is inseparable from the effect of health related event of global
concern. Thus, having recorded growing confirmed cases of the COVID-19 in Nigeria since
February 27, 2020 when the first index case was confirmed, and the resultant drastic fatality
since March 23, 2020 when the first death was recorded, there is a concern to unearth the
association between the stock market capitalisation and COVID-19 confirmed cases in
Nigeria. As such, in line with the aspiration of Alfaro et al. (2020) that future studies should
extend investigation on the implication of the pandemic to other countries, as well as
association between firm’s returns and exposure to public health of international concern, this
study is an attempt to examine the nexus between announcement of COVID-19 confirmed
cases and the Nigerian stock market capitalisation.
Review of Related Studies
It is very expedient to document empirical investigation on the event of COVID-19
pandemic. Variegated studies have been carried out to unveil the impact of the novel 21
century pandemic on social, economic, environmental, political, health and other spheres of
human endeavour. Regarding stock market performance, an ample number of studies exist.
Tashanova et al. (2020) made an attempt to investigate the stance of investment dynamics in
a period of pandemic with a few to unearth factors capable of affecting stock prices. Industry
sector analysis was carried out using alternative data through google trends data. The results
show that there exist several sectors that made profit during the ongoing pandemic which
include online education, healthcare and online entertainment which could be sustained in
future. The study majorly focused on identifying prosperous firms during the pandemic
without considering the implication on the market as a whole in the same direction with Ding
et al. (2020). The fact that some entities are making good fortunes during the pandemic does
not suggest that stock markets are performing well.
Lopatta et al. (2020) investigated the implication of listed firms’ reporting habits during the
ongoing pandemic on stock price responses and how capital markets evaluate risk. The study
used a sample of about 300 international firms (drawn from ten countries) that included an
assessment of the effect of COVID-19 on their businesses. The study found out that firms that
report COVID-19 crisis in their annual reports display reduction in beta values as well as
noteworthy improvement in their abnormal returns compared to those that do not, which
suggest that investors appreciate firms’ aptness in incorporating global crises in their reports,
thereby ensuring transparency. The attention of the study was directed at the investors alone,
whereas, interest of other stakeholders is also calling for attention and investigation.
Takahashi and Yamada (2020) made an attempt to identify determinants of Japanese stock
returns during the first quarter of 2020 in the face of the ravaging COVID-19 pandemic. Four
factors examined are structure of ownership, firms’ liquidity, exposure to two leading
business associate nations, and environment, social and governance scores. Ordinary Least
Square regression was carried out on data obtained from all firms listed in at least one
Japanese stock market as at December 30, 2019 except financial service firms. The findings
show that antithetic abnormal returns exist for Nikkei 225 index firms and for firms that get
foreign direct investment from China and the US, while ESG intensity is negatively related
with abnormal stock returns, and firms with low liquidity, low cash-holding and high
14
COVID-19 Pandemic ……….. Alade

financial leverage firms, recorded negative abnormal return. The study was also more
concerned about firm specific stock returns in a similar direction with Ding, Levine, Lin and
Xie (2020) that focused on share price reaction to the pandemic.
Baig, Butt, Haroon and Rizvi (2020) examined the consequence of COVID-19 outbreak on
the US equity markets with main attention on its liquidity and volatility dynamics. The results
show that the upward trend in confirmed cases and deaths inflicted by COVID-19 is related
to statistical significant rise in market low activity volume and unpredictability, a situation
also driven by lockdown and restrictions. The direction of the study is exceptional as it
targets the core of the market existence.
Ibikunle and Rzayev (2020) investigate the effect of stock price volatility on unlit market
share and traders’ venue choice by examining the impact of external shock of the coronavirus
pandemic on financial markets as well as the imposed restrictions on non-transparent trading.
110 European stocks were used as samples consisting 55 control and 55 treated stocks.
Findings based on univariate and multivariate analyses performed show succinctly that
market volatility driven by COVID-19 resulted in reduction in informational efficiency of the
stock prices compared with stocks under dark trading restrictions.
Ding et al. (2020) assessed reactions of stock prices from 56 countries to the shock of
COVID-19 outbreak as it affects corporate attributes unlike Ibikunle and Rzayev (2020) who
focused on volatility of the stock price. Data were obtained from over 6000 firms. Findings
reveal that the shock on stock prices of firms with more non-financial institutional ownership
performed better, while that of the firms with stronger cash, less debt, higher profits, reduced
exposure to the pandemic as a result of location of customers and supply chains, engage in
higher CSR and low entrenched executives was very mild, but very worse for firms with
higher hedge fund ownership. These findings unveil possible implications of the pandemic on
corporate characteristics, capable of redefining stock price values as was observed by Al-
Awadhi et al. (2020).
Al-Awadhi et al. (2020) examine the effect of the Coronavirus pandemic on Chinese stock
market outcomes like Takahashi and Yamada (2020). Panel data regression analysis was
performed using daily confirmed cases of COVID-19 and 1,579 stocks data of firms stated in
the Hang Seng Index and Shanghai stock exchange composite Index between January 10 and
March 16, 2020. The results show negative interaction of confirmed active and death cases
from COVID-19 outbreak with stock market returns. It implies that the emergence of
COVID-19 outbreak at the initial stage brought about decline in the stock market returns of
the source economy or territory. This can trigger a research guess that other economies with
the stain of the novel virus would not be spared.
Shive (2010) has made an earlier effort to investigate the effect of social influence on daily
individual investor’s trading and stock returns in Finland. Data were obtained from 20 most
active stocks for a nine-year period spanning between 1995 and 2003. The study records that
a measure of the rate of transmission of diseases and hearsay through social contact foretells
individual investor trading. It also documents a significant social effect on individual
investor’s trading, and that socially enthused trading can predict stock returns.
Alfaro et al. (2020) investigated daily changes in predictions during SARS and COVID-19
pandemics outbreak in Hong Kong and US respectively. The study finds out that at the firm's
level, losses in market value related to COVID-19 increase with capital intensity and
leverage, and are deeper in industries more conducive to disease transmission.

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Ilorin Journal of Economic Policy Special Issue Vol.7, No.3: 12-23, 2020

It is very obvious from the existing empirical studies reviewed above that the nexus between
COVID-19 pandemic and Nigerian stock exchange market capitalisation has not been
investigated while most of the studies carried out in other parts of the world focused on stock
returns or industry specific factors. Divergence of submissions from existing studies informed
the hypothetical guess made in this study that there is no statistical significant relationship
between COVID-19 confirmed cases and Nigerian stock market capitalisation.
Methodology
The study employed ex-post facto survey research design since the event under investigation
has just occurred and is still ongoing. Since the first confirmed case of the pandemic was
recorded on February 27, 2020, time series secondary data for a three-month period covering
1 March to 31 May 2020 were obtained and used for this study. The data were collected on
daily basis from the Nigerian stock exchange website, the Nigeria Centre for Disease Control
(NCDC), and the World Health Organisation (WHO) websites. Market capitalisation data
were obtained from the NSE (data of the last working day before holidays and weekend were
held constant for the two periods) while COVID-19 confirmed cases records were drawn
from the NCDC and WHO websites. Vector regression model was used due to non-
stationarity of the dataset. Bidirectional causality is also considered among the endogenous
variables of natural log of market capitalisation (ln_mcapt), Total Nigeria confirmed cases
(tncc), Total African confirmed cases (tacc) and Total global confirmed cases (tgcc).
Model specification
Models in equation 1 to 4 serve as the endogenous variables of the VAR model. Equation 1
shows the endogenous variable (lnmcapt) which serves as a function of its lagged values and
the lagged values of other variables in the model.
ln_mcaptt = a + πln_mcaptt-1 + ɸtncc t-1 + μtacct –1 + Ƶtgcct-1 + ɛt Equ. 1
tncc = a + πln_mcaptt-1 + ɸtncc t-1 + μtacct–1 + Ƶtgcc t-1 + ɛt Equ. 2
tacc = a + πln_mcaptt-1 + ɸtncc t-1 + μtacc t–1 + Ƶtgcct-1 + ɛt Equ. 3
tgcc = a + πln_mcaptt-1 + ɸtncc t-1 + μtacct–1 + Ƶtgcct-1 + ɛt Equ. 4
Where;
ln_mcapt, tncc, tacc, tgcc = the endogenous variables specified in the same level with equal legs Ks
ln_mcaptt-1 , tncc t-j , tacc t – m , tgcc t – n = lagged function of the endogenous variables
ln_mcapt = the natural log of market capitalisation
tncc = Total Nigeria confirmed cases
tacc = Total Africa confirmed cases
tgcc = Total Global confirmed cases
π, ɸ, μ, Ƶ = short-run dynamic coefficient of the model adjustment
t = March 1 to May 31, 2020

Results and Discussion

Descriptive analysis:
The descriptive statistics of the data are presented in Table 1.
Table 1: Descriptive analysis of the variables
MCAP TNCC TACC TGCC NCC ACC GCC
Mean 1.21E+13 2205.815 24055.28 2182957. 109.8913 1093.913 63745.91
Median 1.20E+13 424.5000 11605.00 1879890. 35.00000 604.5000 75927.00
Maximum 1.38E+13 10162.00 100610.0 5934936. 553.0000 3973.000 117551.0
Minimum 1.08E+13 1.000000 2.000000 87137.00 0.000000 0.000000 1739.000
16
COVID-19 Pandemic ……….. Alade

Std. Dev. 8.16E+11 2992.906 28370.69 1841082. 127.6541 1100.571 34305.88

Skewness 0.410731 1.229825 1.170804 0.433535 1.044259 0.893577 -0.678407
Kurtosis 2.183867 3.133852 3.190109 1.867682 3.329629 2.620618 2.167732

Jarque-Bera 5.140020 23.25986 21.15718 7.796821 17.13716 12.79511 9.712177

Probability 0.076535 0.000009 0.000025 0.020274 0.000190 0.001666 0.007781

Sum 1.12E+15 202935.0 2213086. 2.01E+08 10110.00 100640.0 5864624.

Sum Sq. Dev. 6.06E+25 8.15E+08 7.32E+10 3.08E+14 1482897. 1.10E+08 1.07E+11

Observations 92 92 92 92 92 92 92
Source: Authors’ Compilation (2020)

Table 1 shows the daily descriptive statistics of variables in the study. During the period
under review, the average market capitalisation stands at N12.1bn while the minimum and
maximum market capitalisation stand at N10.8bn and N13.8bn respectively with associated
standard deviation N8.16bn. The Jarque-Bera statistic of 5.140020 with p-value of 0.076535
suggests that the distribution of the dependent variable is normal at 0.05 level of significance
supported by skewness value within ±0.5.
The average daily Nigeria confirmed cases (NCC) of COVID-19 stands at about 110 with
standard deviation of 127.6541 and associated minimum of 0 and maximum 553 confirmed
cases of covid-19 during the three months under review, while total confirmed cases stood at
10,162 as at May 31, 2020. The Total Nigeria Confirmed Cases (TNCC) of 10,162 represents
10.1% and 0.17% of Africa and Global confirmed cases respectively, and about 0.0046% of
the Nigerian population. Thus, the prevalence of the highly contagious ravaging virus is
relatively still within the curb if adequate measures are deployed and embraced.
Average confirmed cases in Africa (ACC) for the three months is about 1,094 with associated
minimum and maximum confirmed figures of 0 and 3,973 respectively as well as the
standard deviation of about 1,101. As at the last day of the period the study covered, the Total
Africa Confirmed Cases (TACC) was 100,610, representing about 1.695% of the Total
Global Confirmed Cases (TGCC) which stood at 5,934,936. This shows insignificant
prevalence of the pandemic in the second most populated continent in the world as at the time
of this study.
The global arena average confirmed cases for the three-month period stands at approximately
63,746 with the standard deviation, maximum and minimum confirmed cases of about
34,306, 117,551 and 1,739 respectively.
Generally, the descriptive analysis shows that both Nigeria and Africa confirmed cases are
more widely distributed than Global confirmed cases and the Nigerian stock market
capitalisation. The trend of the dataset using its natural log (ln) form is presented in Figure 1,
covering 92 days of 1 March to 31 May.

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Ilorin Journal of Economic Policy Special Issue Vol.7, No.3: 12-23, 2020

Figure 1: Trend of the variables

Source: Output of trend summary obtained from the Excel software package (2020)

A careful look at the chart suggests a steady marginal decline in the stock market
capitalisation as number of Coronavirus confirmed cases increased with the record of lowest
value in the second month of the investigation after which it began to rise but not up to the
market capitalisation value as at the dawn of the first confirmed case in Nigeria. Total global
confirmed cases maintained steady increase all through the period under review like Nigeria
and Africa total confirmed cases (TNCC and TACC) except that TGCC declined sharply and
began to rise towards the end of May. Africa confirmed cases crisscrossed at the early stage
of the period as NCC flattened but both continued to rise to the end of the period under study,
although crisscrossed at times. Succinctly, increase in the pandemic confirmed cases went
with decline in the Nigeria equity market capitalisation at the onset, but further rise in the
confirmed cases failed to go with further decline in the stock market performance.
Stationarity tests
The results of stationarity tests conducted using Augmented Dickey-Fuller (ADF) show that
only two of the variables (tacc and tncc) passed the stationarity test while the other two
showed non-stationarity. This means that, two of the variables are co-integrated, while the
other two are not. Hence, Ordinary Least Square (OLS) regression is inappropriate to analysis
the data in order to avoid spurious result. Consequently, Vector Auto Regression (VAR) was
employed because it is more appropriate to cure problems of non-stationarity, auto-serial
correlation, heteroscedasticity and multicollinearity (Cuvak & Kalinauskas, 2009; Watson,
1994).

Inferential statistics
Table 2: Vector autoregression results
(1) (2) (3) (4) (5) (6) (7) (8) (9)
VARIABLES ln_mcapt Tncc ln_mcapt Tncc Tacc ln_mcapt Tncc tacc tgcc

L.ln_mcapt 1.161*** 923.8 1.150*** 782.8 -353.8 1.123*** -238.0 -2,912 -4.578e+06
(0.102) (600.6) (0.104) (554.6) (3,108) (0.111) (517.0) (3,260) (5.157e+06)
L2.ln_mcapt -0.221** -934.1 -0.205** -741.6 -1,261 -0.176 298.0 1,418 -3.089e+06
(0.0982) (575.8) (0.102) (544.7) (3,052) (0.110) (511.4) (3,225) (5.101e+06)
L.tncc 7.51e-06 1.295*** 7.12e-06 1.361*** 2.050*** -1.11e- 1.376*** 1.695** 857.4
06
(1.73e- (0.102) (2.07e-05) (0.111) (0.620) (2.26e- (0.105) (0.664) (1,050)
18
COVID-19 Pandemic ……….. Alade
05) 05)
L2.tncc -6.42e- -0.268** -1.00e-05 -0.402*** - 5.94e-07 -0.372*** -1.507** -1,402
06 2.029***
(1.80e- (0.106) (2.02e-05) (0.108) (0.606) (2.30e- (0.107) (0.676) (1,070)
05) 05)
L.tacc -1.83e-06 - 0.668*** -1.95e- - 0.623*** 141.7
0.0610*** 06 0.0914***
(3.71e-06) (0.0198) (0.111) (3.89e- (0.0181) (0.114) (180.7)
06)
L2.tacc 2.32e-06 0.0704*** 0.376*** 2.09e-06 0.0943*** 0.397*** -61.53
(3.79e-06) (0.0203) (0.114) (3.94e- (0.0183) (0.116) (182.9)
06)
L.tgcc 6.39e-10 6.04e- 0.000107 0.289***
05***
(2.38e- (1.11e-05) (6.98e- (0.110)
09) 05)
L2.tgcc 1.81e-09 -1.42e-05 6.42e-05 0.248**
(2.33e- (1.08e-05) (6.83e- (0.108)
09) 05)
Constant 1.800** 336.4 1.651** -1,227 48,870** 1.586** -1,813 45,138** 4.499e+07
(0.728) (4,268) (0.782) (4,189) (23,476) (0.781) (3,635) (22,921) (3.626e+07)

R-squared 0.3835 0.9929 0.9940 0.8600

R-squared adj 0.3625 0.9927 0.9938 0.8552
F-statistics 18.25*** 228.71*** 341.18*** 180.22***
Autocorrelation NO NO NO NO

Observations 90 90 90 90 90 90 90 90 90
Standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
Source: Authors’ Compilation (2020)

In the result shown in Table 2, we employed a Vector Auto-correlation Regression (VAR)

model to examine the impact of COVID-19 information of the total Nigeria confirmed cases
(tncc), total Africa confirmed cases (tacc) and total Global confirmed cases (tgcc) on the
Nigerian stock market equity capitalisation. In the VAR models, these are endogenous
variables that had a bidirectional causality.
For the sake of brevity, we only report the coefficients of the variables related to the reported
confirmed cases. Hence, in the VAR model the endogenous variable is equal to the lag of
itself and other variables in the model.
In_mcapt, as the endogenous variable the result revealed that lag1 has a positive and lag2 has
inverse relationship but only significant statistically at 1% level of significance in lag1. In the
same vein, the lag1 and lag2 of tncc in consonant with In_mcapt has positive associations
only in lag1 but negative in lag2. Both lags are statistically insignificant at all ideal levels.
Lag1 of tacc has negative, while lag2 has positive relationship with the endogenous variable
and both are statistically insignificant. Regarding lag1 and lag2 of tgcc, both have positive
interaction with In_mcapt which are statistically insignificant. The overall result shows
goodness of fit with R squared of 0.3835 which is statistically significant at 0.01 level. This
indicates that systemic variation in endogenous variables were explained by the lags of other
endogenous variables. At the same time the magnitude of R squared adj is 0.3625 after
adjusting for the degrees of freedom and significant at 5% level.
When tncc is the explained variable, the result of other explained variables reveal that the
lag1 of In_mcapt has a negative and lag2 has positive nexus with tncc and were statistically
not significant at 10% level. In the same vein, the lag1 has positive association while lag2 has
negative association with tncc. Both lag1 and lag2 are statistically significant at 1% level of
significance. The lag1 and lag2 of tacc have direct association with the explained variable of
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Ilorin Journal of Economic Policy Special Issue Vol.7, No.3: 12-23, 2020

tncc, but lag1 is insignificant while lag2 is statistically significant at 5%. Moreover, tgcc lag1
and lag2 have positive and negative causality respectively but only significant statistically at
0.01 level in lag1. The value R squared and R squared adj that explained the systemic
variation in the tncc by these values respectively are 0.9929 and 0.9927.
Further, when tacc is a dependent variable, the lag of others dependents variables are in these
ways. The lag1 and lag2 of In_mcapt have negative and positive association with tacc
respectively, with its associated level of statistical insignificance. Whereas, the lag1 of tncc is
positively associated with tacc and negatively related with tacc as endogenous variables at
5% level of statistical significance in both lags. The interaction of lag1 and lag2 of tacc have
direct positive nexus with tacc as explained variable. Both lags are statistically significant at
1% level of significance. Furthermore, both lag1 and lag2 of tgcc has positive relationship
with tacc and these lags were statistically insignificant. The value R squared and R squared
adj that explained the systemic variation in the tacc by these values are 0.9940 and 0.9938 in
that order.
Lastly, lag1 and lag2 of In_mcapt have adverse influence on endogeneity of global confirmed
cases but statistically insignificant. Whereas, the lag1 and lag2 of Nigerian confirmed cases
demonstrate mixed nexus with market capitalisation but statistically insignificant, although
positive in lag 1. On the other hand, the lag1 and lag2 of Africa confirmed cases have
positive and negative association respectively with the Nigerian market capitalisation and are
statistically insignificant. Moreover, the lag1 and lag2 of the global confirmed cases have
positive connection with endogenous variables and are statistically significant at 1% and 5%
level of significance in that order. Both R-squared and adjusted R-squared that explain the
systematic variation in the global confirmed cases are 0.8600 and 0.8552 respectively and are
statistically significant at 0.01 level of significance.
In summary, total confirmed cases in Africa (tacc) and world-wide (tgcc) have antithetic
association with lag1 of ln_mcapt. This means that any increase in the announcement of
global and Africa confirmed cases of COVID-19 brings about declining shock on the
Nigerian stock market capitalisation, but the shock is statistically insignificant. Then, total
confirmed cases of COVID-19 in Nigeria (tncc) and global also have adverse causality with
the lag2 of ln_mcapt. Similar VAR analysis conducted using daily confirmed cases in
Nigeria, Africa and global for the three-month period as presented in Appendix I revealed the
same results and statistical significance except for differences in their coefficient values. It
therefore implies that any rise in the number of COVID-19 confirmed cases announcement
brings about abating shock to the stock market capitalisation, but the shock is also
statistically insignificant. In other words, implication of the announced confirmed cases of
COVID-19 in Nigeria on the Nigerian stock market performance is mixed while the global
confirmed cases increment has latent to reduce the market improved performance during the
period under investigation.
On the other hand, except for the lags mentioned above that have adverse unidirectional
relationship with market capitalisation, the other lags of endogenous variables have positive
unidirectional association with market capitalisation. This result implies that any
announcement of COVID-19 confirmed cases either in Nigeria, Africa or globally has slight
shock increase on the Nigerian stock market capitalisation but are statistically insignificant to
have a ripple effect on the Nigerian economy through the market.
The findings of this study go in the direction of the opinion of Alfaro et al. (2020) that there
is possibility of quick recovery of the market from the shock inflicted by the pandemic. It is
also in tandem with the submission of Tashanova et al. (2020) that some companies made
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COVID-19 Pandemic ……….. Alade

some fortunes during the pandemic which has propensity to cushion or palliate the likely
effect of the pandemic on the market performance. On the contrary, our finding is at variance
with Baig et al. (2020) who noted that the upward trend in confirmed cases and deaths
inflicted by COVID-19 is related with statistical significant rise in market low activity
volume and unpredictability in the United State.
Conclusion and recommendation
The study was an attempt to examine the relationship between confirmed cases of the novel
Coronavirus in Nigeria, Africa continent and globally, and the Nigerian stock market
performance. The major attention centres on the equity market capitalisation as a reflection of
the activities of the stock market participants. Based on the data employed, period under
investigation, and statistical method used, this study submits that COVID-19 confirmed cases
in Nigeria have mixed impacts, as global confirmed cases information present reducing
impact on the Nigerian stock market capitalisation. Nevertheless, there is no statistical
significant evidence to support this submission. This might possibly be due to the fact that
stringent containment measures put in place at the onset of the pandemic were beginning to
be relaxed in the third month of the investigation, thereby opening up the market for normal
trading activities through investors’ revived confidence.
It is therefore concluded that, although the global health crisis perhaps could bring sudden
shock on the stock market due to certain restriction of investment activities or lack of
investment opportunities during the crisis, it does not possess a significant toll on the
Nigerian stock market performance. The implication is that, plausible severity of global
health concern on emerging stock market like NSE can be abated through prompt deployment
of precautionary measures. It is recommended that government together with the leadership
of the capital market should embrace and implement investors support public programmes,
through appropriate media, capable of stabilising investors’ confidence in the market around
the wake of such unprecedented global health insurgence in order to forestall its short-run
effect on the market, impounded by the investors’ destabilisation. In addition, stock market
participants and regulators should be more concerned about health safety measures and be
stable at the wake of any future epidemic or pandemic, rather than exit from the market. We
also recommend that further attempts could be made by future study to investigate sectoral
impact of the pandemic’s confirmed cases and fatalities.

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 COVID-19 Pandemic ……….. Alade

Appendix I
Vector autoregression results using daily confirmed cases
Variables ln_mcapt ncc ln_mcapt Ncc acc ln_mcapt ncc acc gcc

Lln_mcapt 1.153*** 1,010** 1.160*** 842.6** -2,433 1.153*** 830.7** -2,576 -17,904
(0.101) (450.5) (0.102) (406.2) (2,132) (0.102) (408.6) (2,069) (73,805)
L2.ln_mcapt -0.203** -918.8** -0.211** -743.0* 2,115 -0.188* -698.9* 2,858 -48,123
(0.0977) (434.8) (0.0982) (392.7) (2,061) (0.104) (417.8) (2,115) (75,455)
L.ncc 1.92e-05 0.589*** 1.41e-05 0.344*** 2.105*** 1.22e-05 0.343*** 2.157*** 21.62
(2.33e- (0.104) (2.64e-05) (0.106) (0.554) (2.66e-05) (0.106) (0.538) (19.20)
05)
L2.ncc 1.07e-05 0.314*** 1.74e-05 0.0299 1.200* 1.78e-05 0.0263 1.069* -0.270
(2.53e- (0.113) (3.16e-05) (0.126) (0.663) (3.16e-05) (0.127) (0.641) (22.87)
05)
L.acc -4.10e-06 0.0188 0.274*** -4.77e-06 0.0169 0.231** 3.821
(4.55e-06) (0.0182) (0.0956) (4.70e-06) (0.0188) (0.0951) (3.394)
L2.acc 4.19e-06 0.0470*** 0.408*** 3.26e-06 0.0455*** 0.390*** 0.810
(4.05e-06) (0.0162) (0.0850) (4.30e-06) (0.0172) (0.0872) (3.109)
L.gcc 1.83e-08 0.000227 0.00702*** 0.354***
(1.29e-07) (0.000517) (0.00262) (0.0934)
L2.gcc 3.96e-08 -0.000106 -0.00484* 0.429***
(1.23e-07) (0.000492) (0.00249) (0.0889)
Constant 1.505** -2,743 1.516** -2,996 9,639 1.068 -3,972 -8,514 1.997e+06***
(0.619) (2,755) (0.616) (2,462) (12,923) (0.950) (3,804) (19,260) (687,015)

R-squared 0.6068 0.8071 0.8789 0.7980

R-squared adj 0.5939 0.8007 0.8749 0.7914
F-statistics 46.82** 126.90** 220.09** 119.85**
Autocorrelation NO NO NO NO

Observations 90 90 90 90 90 90 90 90 90
Standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1
Source: Authors’ Compilation (2020)

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