CBN Digital Commons (Central Bank of Nigeria)
Not a member yet
1580 research outputs found
Sort by
Oil Price Shocks and Macroeconomic Dynamics in an Oil-Exporting Emerging Economy: A New Keynesian DSGE Approach
No full textThe global oil dynamics has significant implications for both oil exporting and importing small open economies. However, much of the literature on oil shocks is oriented towards advanced oil-importing economies. Micro-founded studies that explore the effects of oil shocks from the standpoint of oil-endowed emerging economies are rather sparse, compared to the preponderance of studies on developed oil importers and exporters. Thus, resulting to a consequential knowledge gap on oil price transmission mechanism and a limited appreciation of the growing policy dilemmas in these economies. The paper, therefore, sets up a new Keynesian dynamic stochastic general equilibrium (DSGE) model to study how an oil price shock impact macroeconomic aggregates in an oil-rich emerging economy. We consider a positive oil price shock to uncover the extent to which oil price increase is positive for the economy. The typical small open economy model is enriched with an export-oriented oil firm, a multi-sector foreign production and a non-oil domestic firm. The model is closed with exchange rate-augmented interest rate rule, and it is calibrated for Nigeria, an important oil producer. Macroeconomic responses, sequel to a simulated positive oil price shock reveal evidence of Dutch disease and the operation of the Harrod-Balassa-Samuelson effect. We find a compelling need for oil-endowed emerging economies to address these phenomena by ensuring a robust non-oil sector with limited exposure to the vagaries of oil price oscillation
Is Inflation Always and Everywhere a Monetary Phenomenon? Evidence from Nigeria
No full textIs inflation always a monetary phenomenon in Nigeria? Autoregressive Distributed Lag (ARDL) results of Nigerian data, spanning 2005q1-2017q4, indicate that changes in money supply have no long-run significant impact on domestic price level behaviour. The results, however, reveal that non-monetary factors: import, global oil price, exchange rate, inflation expectation, fuel pump price and monetary policy rate significantly upsurge inflationary pressure. Conversely, household income (the shadow of unemployment) significantly dampens inflationary pressure while fiscal deficits moderate the pressure. The findings establish the dominance of structural and fiscal dynamics in the inflation equation of the economy
Investigating the impact of widening price limits on volatility: the experience of the Nigerian Stock Exchange
No full textThis paper empirically evaluates the impact of return volatility from widening price limits from 5% to 10% on the Nigerian Stock Exchange(NSE) on September 18, 2012 using a Stochastic Volatility model in an event study framework. Using daily trading data from September 2010 to September 2014, the study finds that widening of price limits in the NSE has not increased volatility as feared by some regulators. Stocks with higher free floats and institutional ownership display lower volatility when price limits are widened. This suggests that smaller stock exchanges can improve market efficiency by widening price limits without increasing volatility. The findings also suggest the benefits of widening price limits in improving the price discovery process outweighs any costs associated with irrational behavior by market participants
Education, inclusive growth and development in Nigeria: empirical examination
No full textFundamental changes in the intellectual and social stance of any society have always been preceded by educational renaissance. This paper investigates the role of education in achieving and sustaining economic development in Nigeria. Abstracting from the theory, the paper examines education in Nigeria, its enhancing, including comparative analysis with selected African countries and its connection with economic development. The ARDL model was adopted to examine both the short run and long run relationships between education and development proxied by HDI and education and economic growth within the context of inclusive growth model. Evidence from the estimated long run ARDL model indicated that Secondary school enrolment (SSE) is positively correlated to economic development (proxied by HDI). The results further suggest a direct relationship between GDP per capita (GDPPC) and economic development. The coefficient of HDI indicates that Past economic development enhances current economic development in the short run. Evidence from the estimated error correction model indicates that School enrollment has a positive short run effect on economic growth in Nigeria. The growth rate of population is estimated to improve economic growth with lags. Given the established relationship between education and economic growth and by extension development, the paper made recommendations on admission process, teacher recruitment process, remuneration , funding, discontinuation of the quota system as well as abrogation of some institutions created in the educational sector including JAMB and the Education TED fund
Decomposing Employment Growth in Selected sub-Saharan African Countries: The Roles of Structural Changes and Demographic Transition
No full textThe challenge of employment growth in SSA countries goes beyond economic growth prospects to include structural and demographic dimensions. This study examines the relative contributions of structural changes and demographic factors to employment growth for a set of sub-Saharan Africa (SSA) countries using available annual data from 1970 to 2014. A decomposition approach is employed in the study using the Jobs Generation and Growth (JoGGs) method which generates results that show distributive components of employment, productivity and output changes over time in a system whereby the roles of economic structure and demographic changes could be observed. The study shows that the pattern of structural change in SSA countries has led to more low-productivity and vulnerable jobs generation. Rising shares of the traditional services sector in the economy has driven a large segment of employment into informal low-wage jobs. Major consequences of the nature of demographic changes in the SSA region are found to include decline in overall employment rate and large movement of the labour market towards less productive and low-wage employment. Social policies that address population and migration are therefore required to ensure that demographic factors do not further inhibit availability of productive employment in SSA
Analysis of the determinants of money demand in South Africa: 1990-2019
No full textThis study estimates real intermediate money demand (RM2) and real broad money demand (RM3) for South Africa from 1990 Q1 to 2019 Q4. The main objective of the study was to explore the relationship between money demand and its determinants in South Africa with specific emphasis on the long-run relationship and stability between RM2, RM3,and their determinants. Auto-regressive Distributed Lag (ARDL) bound test for cointegration model developed by Pesaran (2001) was employed. The results found that both RM2 and RM3 are cointegrated with inflation rate, interest rate, exchange rate,real GDP, and credit to the private sector in South Africa. Credit to the private sector (PSC) showed significant and positive effects on the long-run RM2 and RM3 which implied the increased integration of South Africa to the global economy. Also, findings revealed that, both RM2 and RM3 are stable with their explanatory variables as shown by the results of the CUSUM test.Generally, the study lends support to the significance of RM3 as a monetary anchor for inflation targeting in South Africa. Although, the model for RM2 was found to be more significant and healthier than RM3. Thus, the study suggested fora reassessment of the monetary aggregates probably by incorporating foreign interest rates and stock prices in order to ascertain whether or not these results will still hold
Relationship between volatility in domestic oil production, oil price and exchange rate in Nigeria: Co-integration and Granger Causality Tests
No full textThe paper examines the relationship between volatility in domestic oil production, oil prices, and exchange rate in Nigeria. The study employs monthly time series data, from January 2006 to August 2018. Data for the Nigerian Bonny light oil prices (COP), Domestic Oil Production (DOP) and Exchange Rate (EXC) are obtained from the Central Bank of Nigeria (CBN) website. While, dummy variable (DUM) represents stability and instability in the Niger-Delta oil-rich region was traced from historic oil disruptions in the region. Autoregres s i ve Di s tributed Lag (ARDL)/bound testing method and pairwise granger causality were employed. Unit root test result shows that DOP is stationary at level, while COP, EXR and DUM became stationary at first difference. The empirical result from the ARDL, established that there is a long run co-integrating relation between DOP, COP, EXR and DUM. Pairwise granger causality test proves that the direction of causation runs from COPto DOP. However, DOPand EXR are found to granger cause each other (feedback effect). Moreover, the direction of causality between DOP and DUM runs from DUM to DOP. The result further indicated that COP granger causes EXR and not the reverse. The paper recommends fully involvement of natives and traditional rulers for dialogue and negotiations with the militants. The Nigerian government should also give diversification, the most needed attention, and with utmost seriousness it deserved
An Assessment of the Effectiveness of Central Bank Sterilization on Capital Inflows in Nigeria
No full textThis paper assesses the monetary policy response of the Central Bank of Nigeria (CBN) to increases in capital inflows into Nigeria using monthly time series data from January 2009 to December 2017. It presents an econometric assessment of the degree to which the CBN sterilizes net foreign assets (NFA) in response to the capital flows, using Autoregressive Distributed Lag (ARDL) Bounds testing approach. The long run sterilization coefficient obtained suggests that the CBN successfully offset 95per cent of capital inflows in the period of analysis. Against the background of rising financial instability in Nigeria, the study illustrates how sterilization has not adequately tackled the major risks of capital inflows which resulted in asset price bubbles and bursts, equity capital inflows reversal, banking crisis, and currency depreciation which contributed, partly, to the economic recession in 2016. The paper argues that effective policy response to capital inflows must adequately address the major downside risks of capital inflows in the short and medium terms through some clearly defined capital flows management and macro-prudential measures
Asymmetric Impact of Oil Price on Inflation in Nigeria
No full textThis study examines the impact of oil price shocks on inflation in Nigeria. A Non-Linear Autoregressive Distributed Lag (NARDL) approach was applied on quarterly data spanning 1999Q1 to 2018Q4. Results showed that oil price increases led to increase in headline, core and food measures of inflation in Nigeria. However, a decline in oil price resulted in a decline in the marginal cost of production and culminated in moderation of domestic inflation. Furthermore, negative oil price shocks led to higher inflation in Nigeria when exchange rate is dropped from the models, indicating that exchange rate absorbed the impact of oil price declines earlier, as lower oil prices culminated in lower external reserve, depreciation of the naira and ultimately higher inflationary pressures. Also, core inflation tends to respond more to oil price increases than food inflation. These results were robust to changes in econometric specifications and sample period. The study recommends that monetary policy actions of the Central Bank of Nigeria should focus on taming core inflation in periods of substantial oil price increases while strengthening its efforts at ensuring domestic sustainability in food production through its agricultural intervention programmes to further minimize the impact of international oil prices on food inflation. Similarly, the fiscal authorities should ensure that the fiscal stance is not excessively procyclical in periods of rising oil prices
Spillover effect of United States Monetary Policy on Nigeria’s Financial and Macro Fundamentals
No full textThis paper examines spillover effects of U.S monetary policy on macroeconomic fundamentals in Nigeria from January 1985 to December 2018. The study period is partitioned to account for conventional monetary policy (CMP) period, January 1985 to August 2007 and unconventional monetary policy (UMP) period, September 2007 to December 2018. Guided by relevant pre-tests, we find BEKK-VARMA-CCCMGARCH as the most appropriate model. The study finds significant spillover effects of U.S CMP and UMP on interest rate, exchange rate and inflation rate in Nigeria. We, however, observe that while CMP may be a significant accelerator of shocks persistence on interest rates and exchange rates, the extent to which the UMP accelerate shocks in inflation rate tends to vary for different measures of quantitative easing. Thus, in addition to past own shocks and past own conditional variance of these macro fundamentals, understanding their dynamics cannot be in isolation of their vulnerability to external shocks and volatility due to spillover effects of monetary actions in other economies. In formulating monetary policy, it is therefore, imperative for the Central Bank of Nigeria to monitor the monetary policy process of the US to hedge against shocks spillovers