Stock markets play a very critical role in an economy, by offering an avenue for investment which attracts even foreign investors (Hismendi et al., 2021). They also indicate the performance of an economy, by considering the movements in their market capitalization. In Nigeria, the central market is the Nigerian stock exchange. The market enables investors generate returns through speculating on stock price movements or get dividends by holding on to stocks (Yadav, 2017). The movement in stock prices is subject to the degree of efficiency of the stock market, which is an indication of how the stock market prices reflect the available past and future information.

The Efficient market hypothesis theory states that all available information in the stock market has already been incorporated in the stock prices. This means that abnormal gains cannot be made as stocks are usually priced correctly. The theory also states that there are no undervalued or overvalued stocks as the financial securities are always priced correctly. The implication of this is that investors can never consistently outperform the overall market or beat the market by employing investment strategies.

There are three forms of efficiency; weak, semi-strong and strong forms of market efficiency (Kelikume et al., 2020). This study would focus on the semi-strong form of efficiency, which shows how stock prices reflect all available and past information. A focus would be made on dividend payment information, and how it reflects on the prices of stocks.

The semi strong form market

Statement of the Problem

Several studies have been done to determine the efficiency of Nigerian Stock Exchange. Gimba (2012) studied the degree of weak form market efficiency and established that the stock exchange was inefficient in the weak form. The data used was weekly from 2006 to 2009. The study was also focused on weak form efficiency, leaving both semi-strong and strong forms of market efficiency undone. The omission forms the basis of this study.

A more related study was done by Ogundina et al. (2014), testing Nigerian Stock Exchange semi-strong efficiency using dividend payments. The market was noted to be efficient in the semi-strong form. Though the findings agree with those of Ayodele et al.’s (2018), they contradict those of Onoh (2016). Onoh (2016) found that the Nigerian Stock Exchange was not efficient in the semi-strong form using dividend payments and change in dividend policies. The diverging findings leaves the question on whether Nigerian Stock Exchange is efficient or not, in the semi-strong form unanswered, hence necessitating this study.

Manasseh et al. (2016) used bonus issues to determine if Nigerian Stock Exchange was efficient in the semi-strong form. The study established that, the response speed of stocks to bonus information was dependent on the size of the bonus issue. The study also found that the level of impact was different between penny and blue-chip stocks. The implication is that overall market efficiency is affected by the composition of stocks in the market. This study would seek to complement previous studies and fill in gaps and clarify contradictions reached by using a well stratified data.

This study would ensure that investors, stockbrokers, firm management and all other stock exchange interested players are well advised on the level of semi-strong efficiency in the Nigerian Stock Exchange. It would also keep the market sound, considering that it was ranked the best performing in the world in December 2020 according to Adesina (2020) and best in Africa in January 2021, according to Egwuatu (2021). Continuous research on the market efficiency is needed, to maintain such performance, and which is expected to impact positively on the activity of the market therefore needing this research.


The aims and Objective of the Study

The aim of the study is to

  • Determine the Nigerian stock Exchange market efficiency in the semi strong form, using a case study of dividend payment information.

The objective of the study is to

  • To determine if the announcement of dividend by companies leads to investors making abnormal or excess returns in the market or whether there is an overestimation in prices because of the announcements
  • To determine the randomness of the stock prices in the Nigerian stock exchange because of dividend announcements and how quickly share prices on the Nigerian stock exchange reacts to dividend announcements.
  • The findings of the research will also help the regulators of the Nigerian stock Exchange to initiate measures that will improve the market efficiency


Research Questions

The following research questions would be answered by this study:

  1. To what extend does the Nigerian Stock exchange market respond to dividend announcements?
  2. Is the degree of efficiency depended on the type of industry?
  • Does the size of the dividend payment have an effect on market response?

Significance of the Study

This study is beneficial to investors, market regulators, government policy makers, company management and academicians among others. By understanding on the degree of efficiency of the market, investors would be able to make appropriate investment decisions, while the market regulators would be advised on whether there is need to advance the efficiency level. Academicians would also advance their knowledge by understanding on the level of efficiency of the stock market.


























Literature Review

To advance in knowledge and facilitate evaluation of findings, both theoretical and literature review would be done on efficiencies in stock markets. The theories to be reviewed would be;

  1. The Efficient Market Hypothesis
  2. The Prospect Theory And
  • The Rational Expectations Theory
  1. The Random walk theory

Past studies done, both internationally and locally would also be reviewed to determine how they compare and know how the Nigerian Stock Market compares with others studied in terms of efficiency. Recent studies done within the past 3 years would be used to ensure other factors do not too much affect the comparability of the findings.

The efficient Market Hypothesis

The efficient market hypothesis states that stock prices and other financial securities reflect all available information of the companies, it also states that all markets are perfect and efficient. The theory postulates that all investors achieve the same level of profits on the long run and no investor has any advantage over the other. However, this theory has been challenged by various scholars in the past who feels that the market is not efficient, and investors are capable of making. The efficient market efficiency theory also states that no investor can beat the market or find securities that are under-priced or overpriced.

Fama 1970,


















Research Methodology

Research Design

A case study research design would be used in this study. It would involve comparison of stock performance before, and after an information is made available. All stocks listed in the Nigerian stock market would be case study elements, and their dividend payment announcements would be the information considered, whose effect on prices would be used as an indicator of the market efficiency level.

Population of Study and Sampling Methods

Population refers to all elements sharing a common characteristic, which in this case is trading in the Nigerian stock market. All those stocks listed in the market would form this study population, and inferences would be drawn about them. The total population is 155, according to African ‘Xchanges (2021).  The sampling would be done for 30 companies on the exchange that made dividend announcements.

Data Collection

Data would be collected for individual stock prices, industry of listing for the stocks and the individual company 2021 dividend announcement. For the stock prices, data would be collected for 15 days before and 15 days after the date of dividend announcement.


Data Analysis

Historical data of share prices would be collected from and would be analysed using time series methodology to determine the returns generated 1t5 days before the announcement and 15 days after the announcements. The results would also be analysed using regression analysis.

A correlated t-test would also be used in the analysis of the data. It would involve comparison of returns of the stocks before, and after the announcement of dividends. Stratification would be done depending on the industry, to facilitate an understanding of efficiency per industry, in addition to the overall market efficiency. The equation below would be used for the analysis.


Mean 1 and mean 2 – means of the two samples – The standard deviation of the differences in the paired means

n – Sample size



Adesina, O., 2020. Nigerian stocks ranked world’s best-performing stock market. [Online]. Available at: [Accessed 11/10/2021].

African ‘Xchanges., 2021. Nigerian Stock Exchange (NGX) Live. [Online]. Available at: [Accessed 11/10/2021]

Ayodele, A.J., Oshadare, S.A. and Ajala, O.A., 2018. Semi-strong form of efficiency of Nigerian stock market: an empirical test in the context of input and output index. International Journal of Financial Research, 9(1), pp.115-120.

Egwuatu, P., 2021. NSE emerges Africa’s best performing Stock Exchange in January. [Online]. Available at: [Accessed 11/10/2021].

Gimba, V.K., 2012. Testing the weak-form efficiency market hypothesis: evidence from Nigerian stock market. CBN Journal of Applied Statistics, 3(1), pp.117-136.

Hismendi, H., Masbar, R., Nazamuddin, N., Majid, M. and Suriani, S., 2021. Sectoral stock markets and economic growth nexus: empirical evidence from Indonesia. The Journal of Asian Finance, Economics and Business, 8(4), pp.11-19.

Kelikume, I., Olaniyi, E. and Iyohab, F.A., 2020. Efficient market hypothesis in the presence of market imperfections: evidence from selected stock markets in Africa. International Journal of Management, Economics and Social Sciences (IJMESS), 9(1), pp.37-57.

Manasseh, C.O., Ozuzu, C.K. and Ogbuabor, J.E., 2016. Semi strong form efficiency test of the Nigerian stock market: evidence from event study analysis of bonus issues. International Journal of Economics and Financial Issues, 6(4).

Ogundina, J.A., Ajala, O.A. and Soyebo, Y.A., 2014. The test of semi-strong efficiency theory in the Nigerian capital market: an empirical analysis in the context of dividend announcements. International Journal of Financial Economics, 3(1), pp.57-69.

Onoh, J.O., 2016. Semi-strong market efficiency studies of the Nigerian capital market using dividend announcements. Journal of Business and African Economy, 2(1).

Yadav, S., 2017. Stock market volatility-a study of Indian stock market. Global Journal for Research Analysis, 6(4), pp.629-632.

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