EFFECT OF DIGITAL FINANCIAL SERVICES ON LIQUIDITY OF THE NIGERIAN CAPITAL MARKET

Abstract

Liquidity is vital for efficient capital markets, allowing assets to be traded swiftly without significant price fluctuations. However, the Nigerian capital market faces liquidity challenges that impede smooth trading and investor attraction. This study examines the effect of digital financial services on market liquidity. Using an ex post facto design, quarterly time series data from the Central Bank of Nigeria (CBN) Statistical Bulletin and the Nigerian capital market (2014–2023) were analyzed via regression with EViews software. Results revealed that digital financial services have positive but insignificant effect on liquidity of Nigeria capital market at a 5% significance level. The study concludes that digital financial services is crucial for enhancing liquidity of Nigerian Capital Market. It recommends that management of Nigerian capital market and policymakers should focus on improving digital financial services by increasing their adoption and integration. This can be achieved through investments in digital infrastructure, such as broadband and secure payment systems, and by implementing digital literacy campaigns to educate market participants on using digital platforms.