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Computation of the Real Effective Exchange Rate (REER) using the Bank for International Settlement (BIS) Methodology
No full textThe importance of REER and its computation prompted this study to re-estimate the REER for Nigeria, using the Bank for International Settlement (BIS) methodology. The methodology incorporates recent developments in global trade by employing timevarying trade weighting patterns, highlights the effect of third market competitors, and provides a more comprehensive approach to capturing the effects of bilateral exchange rates through the inclusion of double export weights. The method employed the weighing scheme adopted by Turner and Van’t dack (1993) which has its theoretical underpinnings in Armington (1969). The data utilised was monthly series from October 2011 to December 2016 with 2010 as the base year. The results revealed that the computation method adopted mimics that of the International Monetary Fund (IMF), except that the IMF defines exchange rates using direct quotation, while Nigeria uses indirect quotation. The paper identified data constraints both in respect to quality and availability as a challenge for the computation of REER index for Nigeria using the BIS methodology. The former methodology has become obsolete given changes in the global economy and in the composition of Nigeria’s major trading partners
Housing Deficit in Nigeria: Issues, Challenges and Prospects
No full textThis article examines the issues, challenges as well as prospects in the Nigerian housing sector. Following the introductory section, section 2 provides stylised facts about the real estate sector in Nigeria; section 3 investigates the challenges facing the housing sector in Nigeria, as a foundation towards proffering viable policy options in eradicating the housing deficit in the country. Section 4 provides the policies capable of curbing housing deficit in Nigeria, while section 5 discusses the prospects. Section 6 concludes the article
A Text Mining Analysis of Central Bank Monetary Policy Communication in Nigeria
No full textThis paper employs text-mining techniques to analyse the communication strategy of the Central Bank of Nigeria (CBN) during the period 20042019. Since the policy communique released after each meeting of the CBN’s monetary policy committee (MPC) represents an important tool of central bank communication, we construct a corpus based on 87 policy communiques with a total of 123, 353 words. Having processed the textual data into a form suitable for analysis, we examined the readability, sentiments, and topics of the policy documents. While the CBN’s communication has increased substantially over the years, implying increased monetary policy transparency; the computed Coleman and Liau readability index shows that the word and sentence structures of the policy communiques have become more complex, thus reducing its readability. In terms of monetary policy sentiments, we find an average net score of 10.5 per cent, reflecting the level of policy uncertainties faced by the MPC over the sample period. In addition, our results indicate that the topics driving the linguistic contents of the communiques were influenced by the Bank’s policy objectives as well as the nature of shocks hitting the economy per period
Investigating the Impact of Exchange Rate Volatility on Naira Exchange Rate in Nigeria
No full textThis study investigates the impact of naira-to-dollar exchange rate volatility on naira exchange rate returns in Nigeria. Using daily percentage exchange rate returns of the naira per US-Dollar, the study estimated an AR(5)-TGARCH (1,1) to examine whether there is an existence of asymmetry in the time path of the naira exchange rate volatility. The findings indicated that exchange rate volatility leads to increase in exchange rate returns (depreciation). Also, there is the presence of asymmetry in the movement of the exchange rate volatility, such that negative shocks that cause exchange rate returns to fall lead to fall in volatility by a sizehigher than the impact of positive shocks of the same magnitude. The paper recommends that the monetary authority should intensify its monitoring of the exchange rate behavior to curb excessive volatility or erratic market swings. It should also continue to ensure effective implementation of market rules and guidelines to checkmate any speculation-induced arbitrage opportunities and foster credible exchange rate management
Developing the Housing Sector in Nigeria – A Regulator’s Perspective
No full textThis article provides a regulator’s perspective on developing the housing sector in Nigeria. The article first examines the interest of the regulator in the housing sector with specific reference to the CBN’s responsibility for the regulation and supervision of all the financial institutions involved in providing housing finance. The article then examined the state of the housing sector in Nigeria and the issues that have hampered the growth of the sector including: absence of access to low cost funding; weak legal framework; inadequate housing supply; and undercapitalised mortgage banks. On the regulator’s perspective on housing market development the article identified the approach that CBN has adopted which focuses on two main areas: providing the regulatory framework that would allow participants in the primary and secondary markets of the mortgage sector to operate in a safe, sound and stable manner; and market development to provide favourable conditions for mortgage businesses. The article further identified key steps taken to address liquidity risk which include: establishment of the Nigeria Mortgage Refinance Company (NMRC); establishment of the Mortgage Warehouse Funding Limited (MWFL); Uniform Underwriting Standards (UUS); ongoing set-up of the Nigeria Mortgage Guarantee Company; and model Mortgage & Foreclosure Law. Regarding new frontiers for the Housing Sector, the CBN is looking towards implementing the following initiatives for the housing sector: mortgage interest drawback program; mortgage backed securities (MBS); mortgage guarantee company; advocacy for the model mortgage & foreclosure law; and global standing instruction (GSI)
The Land Use Act and the Nigerian Housing Sector
No full textThe article discusses the Land Use Act and the and how it has affected developments in the Nigerian housing sector. Prior to the Land Use Act, all the existing tenure systems encouraged land holding without an obligation to develop them, fragmentation and uncoordinated alienation, hoarding speculatively for value appreciation and without precise documentation. Consequently, the Land Use Act was enacted to: make land easily accessible to all Nigerians; prevent speculative purchases of communal land; streamline and simplify the management and ownership of land; make land available to government at all levels for development; provide the system of government administration of rights that will improve tenure security. The article highlights provisions of the Land Use Act and then examined the state of housing in Nigeria with reference to: rates of housing provision; occupancy ratio; housing price to income ratio; rent to income ratio; general housing quality and adequacy; housing price to income ratio; rent to income ratio; general housing quality and adequacy; and ubiquity of completed unoccupied homes. The impact of the provisions of the land use act on housing in Nigeria and government intervention in the housing process are also discussed. Some of the interventions include: direct housing supply; civil servant housing schemes; direct housing supply to the larger society; the National Housing Policy; strengthening and sustenance of the federal ministry in charge of housing; strengthening of organisations responsible for minimum performance standards; restructuring and capitalisation of finance bodies. government housing interventions include: Site And Services Scheme; Mass Housing Programme; and the Land Swap Programme. The articles recommendations include: provision of masterplans; structure plans for smaller towns and villages; review of plot sizes; evolutionary low-cost housing shells; alternative building materials; review of the land use act; need to shift interest from land ownership to access to housing; infrastructure development; and development of agencies’ information system and networking
Welcome Address by Adebiyi Michael Adebayo
No full textThis welcome address presented by Dr. Michael Adebiyi, the Director, Research Department, Central Bank of Nigeria at the seminar on “Addressing Nigeria’s Housing Deficit”, for CBN Executive Staff at Transcorp Hotels, Calabar, Cross River State, October 07 - 09, 201
Unlocking the Potentials in the Housing Market through Public Private Partnerships (PPP) Investment Model
No full textThe article examines strategies on how unlocking the potentials in the housing market through the Public Private Partnerships (PPP) investment model. The model is seen as essential given that housing is now an indicator of personal socio-economic standing in society, and a core determinant of standard of living and access to economic opportunities globally. The article further discusses the imperative for Public Private Partnership (PPP) Housing and Social Housing or Public Rental Housing. Furthermore some PPP models that may be suitable for housing projects in Nigeria are identified like: Build Own Operate; Design-Build-Finance-Maintain-Operate/Build Operate Transfer and Operation and Maintenance Contract. The article further examines the challenges and solutions to PPP Housing; Public Private Partnership Financing in Nigeria; and Financing Affordable. Also discussed is the role of Infrastructure Concession Regulatory Commission (ICRC) inaugurated in November 2008, as a way of addressing the huge infrastructure deficit in Nigeria and the decrepit state of existing infrastructure within the within the Nigerian PPP Framework. The article concludes by stressing the need for public and private sectors in Nigeria to synergise efforts to address the housing and other infrastructure challenges in the country through appropriate PPP models and arrangements for the benefits of Nigerians
Assessing Contingent Convertible Bonds for Bank Recapitalization in Nigeria
No full textThis study estimates the parameters of credit derivatives, equity derivatives and structural models for bank recapitalisation in Nigeria by employing contingent convertibles (CoCos) and using the Nigeria Treasury Bill rate for 2009 as the risk-free rate, estimated recapitalisation requirements for the banks as at 2009 and relevant banks’ share prices for 2008 and 2009. The study finds the structural approach as the preferred model for CoCo pricing, as it reported the least pricing errors and also builds asset values of the banks from publicly-available quoted stock prices as well as deposit components of bank’s balance sheet information. The study also finds that CoCo bonds are likely to be fully subscribed when issued given the high stock price volatility coupled with high credit spreads in Nigeria. The paper suggests that CoCos could have been issued by the banks to recapitalise themselves without the need for regulatory actions. Therefore, usage of CoCos by banks can reduce the possibility of a bailout with public funds and lessen regulatory actions, if properly implemented, to boost the troubled banks’ capital
Keynote Address by Godwin, I. Emefiele (CON)
No full textThis keynote address presented by Mr Godwin I. Emefiele (CON), the Governor, Central Bank of Nigeria at the seminar on “Addressing Nigeria’s Housing Deficit”, for CBN Executive Staff at Transcorp Hotels, Calabar, Cross River State, October 07 - 09, 2019