Empirical Analysis of Volatility Spillovers Between Nigerian Agricultural Commodity and Equities Markets

This study empirically investigates volatility spillovers between Nigerian agricultural commodity markets and equities markets, examining whether price volatility in agricultural commodity futures and spot prices systematically transmits to equity returns and vice versa, a question with direct implications for portfolio diversification, risk management, and food security policy in Nigeria. The increasing integration of commodity and financial markets globally, driven by the financialisation of commodities, has created interdependencies between agricultural price dynamics and financial market volatility, yet Nigeria-specific empirical evidence on this phenomenon remains sparse in the literature. Daily price data for cocoa, rubber, and sesame seed from the Abuja Securities and Commodities Exchange and the Nigerian Exchange Group are combined with All-Share Index returns data for the period January 2018 to December 2023. A multivariate GARCH model with dynamic conditional correlations and the DCC-GARCH framework of Engle are used to estimate time-varying conditional correlations and test for bidirectional volatility spillovers using the Diebold-Yilmaz connectedness index. Generalised forecast error variance decompositions from the model system quantify the directional spillover magnitudes. Results identify significant volatility transmission from cocoa price fluctuations to agribusiness equities but weaker evidence of reverse transmission from equities to commodity markets, suggesting commodity-to-equity directionality. Keywords: volatility spillovers, GARCH, agricultural commodities, equities market, Nigeria