FinTech Adoption and Stock Market Liquidity in Nigeria: An Evidence Using ARDL and VECM Approaches (2011–2023)

---

Authors: SUNDAY DARE AWONIYI

Abstract

This study investigates the impact of financial technology (FinTech) adoption on stock market liquidity in Nigeria over the period 2011–2023. Using a FinTech Adoption Index constructed from mobile money usage, digital accounts, and internet penetration, the study evaluates liquidity through turnover ratio, Amihud illiquidity measure, and returns on the All-Share Index. Annual data were sourced from Central Bank of Nigeria, Nigerian Exchange Group and World Bank, with missing FinTech observations interpolated. The analysis utilises a combination of Autoregressive Distributed Lag (ARDL) modelling, Error Correction Model (ECM), Johansen cointegration tests, Vector Error Correction Model (VECM), and impulse response functions to elucidate both short-term dynamics and long-term relationships. ARDL results show that Gross Domestic Product, Growth (GDPG) significantly affects liquidity, while FinTech adoption is not significant in the short run. However, the ECM coefficients in the ASI and ILLIQ models indicate meaningful long-run adjustment. Johansen and VECM results confirm a cointegrating relationship among FinTech adoption, liquidity, and macroeconomic variables, with FinTech responding to liquidity and growth indicators. Impulse Response Analysis further reveals that shocks to FinTech adoption temporarily increase turnover. Overall, the results indicate that FinTech adoption has significant implications for the development of digital finance policies in emerging markets and helps to improve market liquidity over time.

Keywords: FinTech Adoption, Stock Market Liquidity, ARDL, VECM, Nigeria

8. 2025 - NIJAF - 17 - 208 SUNDAY DARE.pdf

Download PDF • 447KB