Abstract
The aim of this study was to investigate the effect of fiscal policy on stock market performance in Nigeria. The specific objectives were to investigate the effect of company income tax on the stock market performance in Nigeria; to find out the effect of petroleum profit tax on the stock market performance in Nigeria; to investigate the effect of government capital expenditure on stock market performance in Nigeria; and to determine the effect of government recurrent expenditure on the stock market performance in Nigeria. The study adopted ex post facto research design. The data were analyzed using a number of empirical tests. The study adopted ex post facto research design and employed times series data sourced from the CBN statistical bulletin and the Nigeria Stock exchange group. Evidence of long-run relationship was found among the model variables through the Johansen test, and a fast speed of adjustment at 10.01% annually. The major findings of the study are: government capital expenditure has significant positive effect on the stock market performance in Nigeria; government recurrent expenditure has significant positive effect on the stock market performance in Nigeria; company income tax had significant negative effect on the stock market performance in Nigeria; and petroleum profit tax has significant negative effect on the stock market performance in Nigeria. The study concluded that fiscal policy had significant but mixed effect on the stock market performance in Nigeria for the period reviewed. Based on the findings, the study recommended that: the government should increase the capital component of its spending and direct it towards provision of critical infrastructures; this will further boost investors' confidence in the stock market and the economy at large; the government may wish to increase or sustain the current rate of the recurrent component of its spending; increasing it will boost consumption demand and improve stock market performance; the policymakers should design a strategy toward sustaining or reviewing down the company income tax due to evidence of negative shock on the stock market; and the petroleum profit tax should be increase only for the aim of mitigating the environmental risks that follow it operations and which affect stock market outcomes.