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Analysis of the Impact of Central Bank of Nigeria\u27s Agricultural Intervention Funds on the Economy
No full textThis paper set out to investigate the impact of Central Bank of Nigeria\u27s interventions on the agricultural sector within an economy-wide framework of general equilibrium modelling. The paper adopted a dynamic (recursive), two-sector general equilibrium model of the Nigerian economy with some modifications on the standard model developed by the Centre for Econometric and Applied Research (CEAR) and incorporated the contributions of the CBN\u27s agricultural based interventions as increases in the stock of agricultural capital to have a more robust size of interventions into the agricultural sector. The SAM used for the CGE model analysis was derived from the updated Input and Output Table for 2011. Results indicated that interventions contributed positively (although marginally) to GDP during the periods of intervention; contributed to a marginal decline in government subsidy expenditures and improvement in government revenues; led to an increase in exports of agricultural commodities and marginal reduction in the volume of imports of intermediate goods used in the agricultural value chain; prices of agricultural commodity exports increased marginally in the fifth period as a result of the interventions; interventions impacted positively on the incomes and utility of rich farm owners. However, poor farmers were worse off with interventions, as their income and utility increased steadily at a faster pace without intervention than it did with interventions. It is recommended that targeted extensive support must be provided to poor farmers to improve their competitiveness and ensure they are not crowded out by the rich farm holders and access to markets for fair and competitive prices needs to be encouraged
An adjusted classical model for interest-free financing in Nigeria
No full textThis paper examines an interest-free macroeconomic models by adjusting the classical model into an interest-free macroeconomic model as a basis for developing a comparative analysis. The study adopted a descriptive approach by describing the mechanics for obtaining an interest-free macroeconomic model from a prototype western model. It was observed that most Muslims in Nigeria are interested in adopting interest free financing under the western system. This is a reason for converting a western model into an interest-free model.This conversion allows policy-makers to gain useful insight in the process in transition from the western system to the Islamic system. The Islamic principle of prohibition of interest is incorporated into the selected model to develop a general macroeconomic system applicable for those economies in which an interest-free financial system is prevalent, such as Nigeria. It was concluded that application of western scientific tools of analysis is accepted in Islam as long as they are free of anti-Islamic elements and this has also conform with the Central Bank of Nigeria draft guidelines for regulations of interest free banking in Nigeria
Impact of financial deepening on socio-economic development in Nigeria: 1991 - 2018
No full textThis study investigates the relationship between financial deepening and socioeconomic development in Nigeria. The specific objectives examined the impacts of broad money supply, private sector credit and financial openness on human development index in Nigeria from 1991 to 2018. Time series data on each of the variables were analyzed using Fully Modified Least Squares and Granger Causality test. The unit root test results revealed that all the variables in the model became stationary after first difference and are all I (1). The cointegration test result revealed that the variables had long run relationships. The cointegrating regression result indicated that broad money supply had significant negative relationship with HDI. A 1 percent increase in broad money supply would lead to 0.0103 reductions in the HDI score. On the other hand, private sector credits and financial openness index were found to exert significant positive impact on HDI. The causality test results indicate that unidirectional causality runs from broad money supply and credit to the private sector, to HDI. It was equally found that bidirectional causality exists between financial openness and HDI as well as joint causality flowing from all the explanatory variables to HDI. This finding implied that the explanatory variables collectively have the power of predicting changes in HDI. Hence, it was concluded amongst others that CBN should support more crossborder mobility of capital in order to provide opportunities for free flow of financial products and services to facilitate the process of socio-economic development
Measuring the Risk in Risk Measures: The Case of the Nigerian Foreign Exchange Market
No full textoai:dc.cbn.gov.ng:efr-1001As part of its mandate, the Central Bank of Nigeria (CBN) carried out a series of foreign exchange policy decisions from 2014 to 2016. This paper, therefore, evaluated model risk of two key risk measures, expected shortfall (ES) and value-at-risk (VaR), due to the CBN\u27s policy decisions using daily data for the naira exchange rates covering 2010 to 2014, as well as, 2011 to 2015 for the respective policy resolutions. The risk measures were implemented using 6 different models, as the most common techniques used by regulators and practitioners. The implementation of Basel III recommends the switchover from VaR to ES and a reduction in condence levels from 99 per cent to 97.5 per cent. The paper estimated VaR and ES at 97.5 per cent and 99 per cent levels and assessed their accuracy using risk ratios methodology. The results indicated that VaR 99 per cent per cent measure produced higher model risk than ES 97.5 per cent. Therefore, ES 97.5 per cent per cent should be preferred to VaR 99 per cent per cent for naira exchange rate risk forecasting and capital allocation. The study also recommends that regulators, banks and other participants should seriously consider model risk analysis and make it part of the regulatory and operational design process
Globalisation and Government Size in Nigeria: A Revisit of the Compensation Hypothesis
No full textThe link between globalisation and government expenditure has remained contentious in the literature particularly from a disaggregated perspective. Hence, this study examines the compensation hypothesis by analysing the relationship between globalisation and government size in Nigeria for the period 1981 to 2018. Globalisation is proxied by trade and financial openness while government size is measured by final consumption expenditure by the general government (FCE), share of government expenditure on economic services (ECO), share of government expenditure on social and community services (SCS), and share of government expenditure on transfers (TRF). The study employed the error correction modelling technique and the results of the study support the validity of the compensation hypothesis for three models (FCE, SCS, and TRF) but not for the ECO model. The study concludes that the compensation hypothesis cannot be claimed to hold for the Nigerian economy using aggregate data but rather the validity of the compensation hypothesis is component specific with respect to government expenditure. Also, results of this study showed that the findings of previous studies based on aggregate data cannot be generalised for all the components of government expenditure
Bank loan loss provisioning during election years in Nigeria
No full textThe paper investigates the behavior of loan loss provisions during election years in Nigeria. Election events create uncertainties in the business environment. Election and post-election events may amplify credit risks for banks, requiring banks to keep higher loan loss provisions. Using country-level data, it was revealed that the election year did not have a significant effect on the level of loan loss provisions in the Nigerian banking sector. However, the banking sector had high provisions when it is undercapitalized during election years
Microfinance credit and micro enterprise development in the agricultural sub-sector of the Nigerian economy
No full textThis study seeks to examine the relevance of micro financing credit loans to Agri-business in Lagos State, Nigeria - the development of Agricultural sub-sector centering the attention to the contribution of the institutions involved in the provision of these credits.It makes a critical review of the performance of microfinance institutions in Nigeria, based on a survey of the Agricultural Credit Guarantee Scheme Fund (a microfinance scheme established to boost the agricultural sub-sector of Nigeria). The study examines the scheme – the institutions involved and analyses the performance using the outreach paradigm via the mixed approach research techniques – qualitative and quantitative research methods. In analyzing the outreach performance, the study evaluates the extent to which the scheme is fulfilling its objectives. Questionnaires were distributed to farmers in Lagos state. The data collected were analyzed using simple percentage presented in tables and further analyzed using the chi-square method. Findings of the secondary data established from the Central Bank of Nigeria, indicates that the operation of the ACGSF though not stable has grown over the years, driven largely by expanding agricultural sector activities. The study reveals that the process of obtaining funds from the scheme is stressful and needs to be simplified. It also reveals that there is the urgent need to approve and implement a policy framework that would regulate and standardize micro finance operations, accessing medium to long term sustainable commercial sources of funds and increase mobilization of savings and shifting a good proportion of credit portfolio to the promotion of the real sector activities, especially agriculture.It is significant that Nigerian microfinance credit must be efficiently employe
The role of the Central Bank of Nigeria analytical balance sheet in monetary policy implementation
No full textThis paper examines the role of the Central Bank of Nigeria (CBN) analytical balance sheet in the implementation of monetary policy. The Bank currently uses a mix of both quantity-based (monetary base) and price-based (short-term interest rate) nominal anchors. However, irrespective of the targeting regime adopted, both depends on the central bank\u27s ability to manage its balance sheet given the huge fiscal influence on banking system liquidity in Nigeria. Therefore, the paper analyses the various liquidity management operations of the CBN and their implications for the size and structure of the analytical balance sheet
Efficiency gain argument of fiscal federalism and economic growth: evidence from five selected developing federal economies
No full textThis paper investigated efficiency gain argument of fiscal federalism and economic growth with evidence from five selected developing federal economies. The curiosity is to ascertain whether the efficiency gain –the fundamental argument why countries adopt fiscal federalism is justified in these economies. The paper uses stochastic frontier model to achieve this objective. The evidence from the selected developing federal economies revealed diverging results. While in Nigeria, Ethiopia and India there is more expenditure decentralization than revenue decentralization suggesting that efficiency gains from fiscal federalism may remain elusive, in Brazil and South Africa there is more revenue decentralization than expenditure decentralization suggesting evidence of efficiency gains from fiscal federalism. The major reason why efficiency gains from fiscal federalism is elusive in Nigeria, Ethiopia and India is because of top – bottom approach to fiscal federalism orchestrated by the delay that money and services witness before reaching the local beneficiaries. Naturally, the gamma parameter ( ) that measures the percentage of the disturbance term due to inefficiency is expected to be low to ensure allocative and technical efficiency of fiscal federalism. However, while the values of ( ) are 0.98 , 0. 92 and 0.65 in Nigeria, Ethiopia and India meaning that about 98%, 92% and 65% of the disturbance terms (μ) are due to allocative and economic inefficiencies in fiscal federalism, in Brazil and South Africa only 0.041 and 0.23 representing 4% and 23% disturbance terms are due to allocative and economic inefficiencies in fiscal federalism. This implies that while allocative and technical inefficiencies in fiscal federalism truncates economic growth in Nigeria, Ethiopia and India, the allocative and technical efficiencies in fiscal federalism promotes economic growth in Brazil and South Africa. On this basis, the paper recommends the need for most developing federal economies to adopt Bottom – Top approach to Fiscal federalism as opposed to Top – Bottom approach. This will ensure that sub national governments are coordinates not subordinates to federal government revenues
Impact of tax revenue on economic growth in Nigeria (1981-2017)
No full textThe main objective of this research is to assess empirically the impact of tax revenue on economic growth in Nigeria, spanning from 1981 to 2017. It employs, time series data obtained from the CBN statistical bulletins, FIRS annual publications and National Bureau of Statistics (NBS) portal. To achieve the objectives of the study, OLS and ARDL techniques were employed to estimate the relationships and the dynamics and longrun effects of independent variables on dependent variable. ARDL bound test revealed that the variables are cointegrated while ARDL long-run estimation indicated that petroleum profit, value added tax and government domestic debt are significant and positively related to GDP. In addition, company income tax and customs and excise duties came out significant but have negative impact on economic growth. Accordingly, the research recommends that, the government should intensify efforts towards increasing the collection of tax revenue, as low contribution of tax revenue to GDP was discovered over the period of the study. This can be done through blocking all loopholes in our tax laws as well as bringing more prospective tax payers into the tax net especially the informal sector