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Welfare Implication of Alternative Tax Rates Adjustment Policy in Nigeria: A DSGE Analysis
No full textThis study sets out to determine the desirable policy adjustment in the tax rate for Nigeria that ensures the least welfare cost. A calibrated small open-economy New Keynesian Dynamic Stochastic General Equilibrium (NKDSGE) model of the Nigerian economy is applied to achieve this objective. Within this framework, we examined the impact of an increase in value-added tax (VAT) rate from 7.5 to 15 percent on key macroeconomic variables relative to the impact of an increase in company income tax (CIT) rate from 30 to 35 percent on macroeconomic variables. Furthermore, we examined the welfare costs of the increases in the rates by ranking their welfare costs. The results indicate that increases in VAT and CIT rates decrease output, consumption and investment in the short run. Furthermore, findings revealed that households are willing to give up around 23 percent of their non-stochastic steady state consumption to ensure that an increase in VAT rate policy is implemented. This is so because the increase in the VAT rate policy resulted in an 11.33 percent welfare cost relative to an increase in the CIT rate policy, which resulted in a 23.18 percent welfare cost. Therefore, the Nigerian government should not consider the increase in CIT rate policy as a desirable policy option
The effectiveness of monetary policy transmission in Nigeria: Evidence from the Monetary Policy Rate and the Cash Reserve Ratio
No full textThis paper investigates the effectiveness of the Monetary Policy Rate (MPR) and Cash Reserve Ratio (CRR) as policy instruments in Nigeria. A structural VAR model is employed to simulate two distinct models measuring shocks from the MPR and the CRR using monthly data from January 2006 to December 2023. Findings show that contractionary monetary policy impulses using MPR and the CRR contract output and credit to the private sector, inflation remains largely positive in the two models, known as the “price puzzle”, but the puzzle is more persistent in the MPR equation. Moreover, shock to MPR strongly influences short-term interest rates (treasury bill rate) only within 3 months. This is similar to the impact of CRR on banks’ reserves which remains positive for the latter part of the horizon. Thus, the study concludes that the MPR exhibits a rapid wide-ranging impact on the selected variables, offering a balanced method for controlling credit growth, interest rates, and liquidity. However, supportive channels may be needed to counteract inflationary trends. Finally, the study recommends improved focus on supply-side limitations, clear communication between expectations and policy measures, deeper financial markets and alternate funding sources
Impact of COVID-19 Pandemic on Performance of Nigerian Stock Market
No full textThis study analyzes the effect of COVID-19 pandemic on the performance of Nigerian stock market. The study uses a number of models that include autoregressive distributed lag, vector auto regression, exponential generalized autoregressive conditional heteroskedasticity and multivariate generalized autoregressive conditional heteroskedasticity models. Findings show that reported cases of COVID-19 have causal effect on daily returns of the Nigerian stock market. The results also show that Nigerian stocks are good for portfolio diversification. The results of variance decomposition confirm the declining importance of COVID-19 cases and deaths as the pandemic slows down. Further results show that, for the duration of the crisis, negative news has more effect on the Nigerian stock market than positive news. The Nigerian stock exchange was not immune from the negative effects of the crisis; but its performance when compared with other markets in the study was fairly good. Hence, Nigerian policymakers should continue to provide the enabling environment that attracts investors to the market and at the same time prepare for the contagious effects that come with foreign investment
Value added tax rate variation, import demand and sectoral output in Nigeria
No full textThis study employs computable general equilibrium (CGE) model to estimate the effect of increase in value added tax (VAT), from 5 per cent to 7.5 per cent, on import demand and sectoral output in Nigeria. The study uses 2020 as the base year for the data analysis. The results show that increase in VAT affects import demand negatively, based on import penetration ratios, with mixed effect across six sectors. The implication of the result is that the VAT policy discourage consumption of foreign products, and constitute excess burden to consumers of such products in Nigeria. The results further reveal that the VAT policy enhances outputs from the agricultural, manufacturing and solid mineral sectors, however, outputs from services, construction as well as oil and gas decline. The result implies that increase in VAT is not detrimental to output in all economic sectors. The study, therefore, concludes that increase in VAT has adverse effect on import demand, and counter-productive in some sectors. It recommends that government should widen the VAT base and increase investment in critical sectors to boost revenue rather than increasing VAT since the policy has undesirable effect on aggregate sectoral output in Nigeria
Impact of Fiscal Policy on Financial Inclusion and Development in Nigeria
No full textThis paper examines the effect of fiscal policy on financial inclusion and development in Nigeria. The study employs the Autoregressive Distributed Lag (ARDL) model and impulse response function (IRF) to determine the extent and response of financial inclusion and development to fiscal policy changes in Nigeria. The study derives a financial inclusion index from three core indicators: access, usage and quality of financial services, while financial development is measured as the ratio of money supply to GDP (M2/GDP). The results show that government expenditure has a significant positive effect on financial inclusion and development, while tax revenue exerts a negative impact. Furthermore, financial inclusion responds more sensitively to changes in government expenditure and tax revenue than financial development. Based on these results, the study recommends fiscal policies that promote financial deepening and foster conducive environment for the growth of financial sector in Nigeria
Trade Liberalization, Non-Oil Export and Economic Growth in Nigeria
No full textThe study examines the impact of trade liberalization and non-oil exports on economic growth in Nigeria from 1986 to 2021. The study utilizes an autoregressive distributed lag model and found the combined effect of trade liberalization and non-oil exports to be positive and statistical significant. While trade liberalization alone may have negative consequences, its synergy with a robust non-oil export can drive sustainable economic growth. The study recommends that strategies to enhance non-oil exports should be encouraged to support the effectiveness of trade liberalization in promoting growth
Stock Market Volatility in the United Kingdom: Simulating Post-COVID-19 Recovery
No full textThis paper investigates the time it would take for the FTSE-100 index to reach its post-COVID-19 peak. The paper utilises an exponential generalised autoregressive conditional heteroscedasticity (EGARCH) model that accounts for leverage effect and asymmetries. The preferred models amongst competing variants was the Autoregressive Moving Average (ARMA)-EGARCH(2,1) specification and was used to predict daily FTSE-100 data from 5th January 2000 to 21st June 2024. The empirical exercise showed that the COVID-19-induced financial crisis negatively affected the United Kingdom’s stock market performance. The results show that the FTSE100 index could reach its post-pandemic peak around 27th August, 2024 (two months after 21st June 2024. Thus, it took about 3 years for the FTSE-100 to reach its prepandemic level and surpassed it in May 2024 before declining. The paper makes a case for strong and coordinated financial and monetary policy responses that can help mitigate the short-term effect of shocks on stock market performance and speed up the recovery process, such as reforming the UK’s corporate governance rule for listed firms, attracting more technology startups and diversifying of the index’s composition towards relatively low risk assets
Modeling the Effect of Population Size on Banking Transaction Channels in Nigeria: Grey Box vs Support Vector Regression
No full textThis study investigates the effect of Nigeria’s population on four selected banking transaction channels. The Nigerian projected population (2022-2027) was used as an input variable for forecasting future volumes of transactions for each channel. The results show that the Support Vector Regression (SVR) model best fits the ATM, Online, and USSD channels of transaction while the Grey-box was better for POS. The forecast results show that ATM, online, and USSD channels had their highest volume of transactions in 2023, while for POS, the highest volume was recorded in 2027. Further results indicate that online and POS transactions would dominate payment system landscape in the future. To better serve customers in the future, Nigerian banks should expand their capacity for online and POS transactions
Poverty and Poverty Alleviation Policies in the North Central Zone of Nigeria
No full textThe paper examined poverty situation in the north central and the poverty alleviation policies of government as they affect the people of the north central zone in particular and Nigeria generally. This study was carried out in the face of the fact that poverty has characterized the Nigerian society such that over 70% of her citizens live below poverty line predicated by hunger, unemployment, poor housing, poor health care and other deprivations in spite of numerous government policies and programs aimed at alleviating or eradicating poverty in Nigeria since independence. Data for the study were generated through both the primary and secondary sources. While the secondary data were generated from essential documents aries, the primary data were generated through the administration of questionnaires. Those data were analyzed using the qualitative-descriptive method of data analysis, consisting of content analysis, inferences and logical arguments. The essence was to interpret the opinion of respondents on the impact of government\u27s poverty alleviation policies on their lives and what is most needed to lift them out of poverty. The study found that government\u27s poverty alleviation policies have had limited impact on the people of the North Central zone because the people were not ‘empowered’ through support for education and loans to do business, instead, they were given ‘hand outs\u27 such as distribution of free food and payment of welfare packages. Hence the study recommended implementation of policies that will help boost economic activities and create jobs such as empowerment through support for education and loans to do busines
Dynamic Effect of Exchange Rate Gap Shocks on Stock Market Deepening: Evidence from Nigeria
No full textThe study examines the exchange rate gap shock–stock market deepening nexus in Nigeria using the structural VAR-X (SVAR-X) technique for the period 1986Q1 to 2018Q4. Findings reveal that exchange rate gap shock has a negative but statistically not significant effect on stock market deepening in Nigeria. It was also found that exchange rate passed–through interest rate from second to thirteen quarter, and further through financial openness whose effect, like exchange rate gap, was negative. This implies that exchange rate gap is significantly and negatively related to interest rate and financial openness in Nigeria. It is therefore recommended that the monetary authority should keep constant tab on the gap between official and parallel market exchange rates as its widening can have a damaging effect on stock market deepening. In addition, there is need to establish hedging instrument market to increase resilience of the stock market and improve stock market deepening in Nigeri