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Oil Price and Exchange Rate Nexus in Nigeria: are there asymmetries
No full textThis paper examines the dynamics in the relationship between oil price and exchange rate in Nigeria by utilizing monthly data spanning January 1986 to June 2018. It specifically determines asymmetries in the relationship between oil price and exchange rate and the effect of oil price shocks on exchange rate. Threshold Autoregressive (TAR), Momentum Threshold Autoregressive (MTAR) and Structural Vector Autoregressive (SVAR) models were employed for the analysis. Findings of TAR and MTAR models confirm the absence of asymmetric cointegration, hence leading to the conclusion that in the case of Nigeria, there are no asymmetries in the relationship between oil price and exchange rate. Findings from the SVAR model show gradual appreciation (though with some time lag) of naira following positive shocks to oil price. The study recommends among others the need for diversification of foreign exchange earnings base of the economy, so as to minimise the effect of negative shocks to oil price
Inflation Dynamics and Exchange Rate Pass-Through in Nigeria: evidence from Augmented Nonlinear New Keynesian Philips Curve
No full textThis paper estimates a nonlinear augmented New Keynesian Philips Curve for Nigeria using the Smooth Transition Regression model for the period 1995Q1 to 2018Q2. The empirical evidence reveals the existence of two inflation regimes during the period under review. Food inflation, energy inflation, firms’ marginal cost, and imported inflation account for most of the changes in the prices of composite consumers’ basket in low exchange rate depreciation regime. However, the exchange rate solely explains price changes in the composite consumers’ basket when inflation switches to high regime. Similarly, the results show that regime change in inflation is largely caused by exchange rate (transition variable) depreciation or devaluation of the naira. Furthermore, the paper finds that the threshold in exchange rate devaluation (depreciation) that triggers a regime switch from low to high inflation regime is about N75 relative to a dollar. The speed of regime switch was found to be significantly high at about 70% per quarter. The paper argues that achieving exchange rate stability is a necessary condition for disinflation during this regime. Therefore, this paper recommends that monetary policy response to low inflation regime must target the various components of the consumption basket while effort to curtail persistent high inflation must include a stable exchange rate of the naira
The Central Bank Balance Sheet as a Tool for Monetary Policy: Evidence from Nigeria
No full textThe study examined the impact of the Central bank of Nigeria’s (CBN) balance sheet on the growth of private sector credit, economic growth and price stability during the period 2006-2017. Balance sheet indicators used were total assets of the CBN and proxy for asset distribution. Employing a vector autoregressive (VAR) model, the study found balance sheet policies to be effective in reducing cost of credit, increase in bank lending, economic activities and a decline in inflation. However, the effects favour asset dispersion (credit easing) against growth in assets (quantitative easing), implying that the Bank can, in the short- to medium-term, sustain its intervention programmes on the economy, but that the programmes, are more effective when the CBN acts as a banker’s bank
Addressing Housing Deficit in Nigeria: Issues, Challenges and Prospects
No full textThe article provides a brief review of housing policies under various regimes in Nigeria namely: the colonial era; independence and beyond; The Shagari administration (1979 -1983); Obasanjo regime under civilian rule14 (1999-2007); Yar’dua regime (29 May 2007 – 9 February 2010); Goodluck Jonathan regime (2010 – 2015); The Buhari administration (2015-2019). The article then discussed the problems militating against the achievement of targets in housing as well as the issues and opportunities. The article concluded by stressing the need to: maintain a conducive macro-economic environment which entails the maintenance of low inflation, low interest rates and stable exchange rates; deepen the housing financial market as and well as liberalising access to it on a long-term basis for all categories of income; simplify transaction costs in all areas of housing such as land allocation, and registration of titles; make available all the information on the procedure for obtaining financial assistance from all quarters by government; ensure that time and money are adequately spent to ensure the availability of locally produced building materials in adequate quantity. This is in view of the fact that building materials and others in Nigeria are always very expensive; and adequate number of skilled labour in Nigeria which is expensive
Oil Price Shocks, Fuel Subsidies and Macroeconomic (In)stability in Nigeria
No full textThis paper studies the macroeconomic implications of oil price shocks and the extant fuel subsidy regime for Nigeria. To do this, we develop and estimate a New-Keynesian DSGE model that accounts for pass-through effect of international oil price into the retail price of fuel. Our results show that oil price shocks generate significant and persistent impacts on output, accounting for about 22 percent of its variations up to the fourth year. Under our benchmark model (i.e. with fuel subsidies), we show that a negative oil price shock contracts aggregate GDP, boosts non-oil GDP, increases headline inflation, and depreciates the exchange rate. However, results generated under the model without fuel subsidies indicate that the contractionary effect of a negative oil price shock on aggregate GDP is moderated, headline inflation decreases, while the exchange rate depreciates more in the short-run. Counterfactual simulations also reveal that fuel subsidy removal leads to higher macroeconomic instabilities and generates non-trivial implications for the response of monetary policy to an oil price shock. Thus, this study cautions that a successful fuel subsidy reform must necessarily encompass the deployment of well-targeted safety nets as well as the evolution of sustainable adjustment mechanisms
Measuring Dynamic Return and Volatility Connectedness among Nigerian Financial Markets
No full textThis study employs the connectedness measure of Diebold and Yilmaz (2012, 2014) to examine the intensity of connectedness among the Nigerian financial markets for the period January 2000 to December 2018. The study used all shares index, Treasury bill rate and Naira/USD official exchange rate to measure stock market, money market and exchange rate market, respectively. The study found connectedness among the Nigerian financial markets to be highly time-varying and appear to be higher during the period of high depreciation of the naira which coincides with the period of falling oil prices and domestic economic meltdown of 2014 and 2016, respectively. This shows that, relative to external shocks, connectedness among financial markets is likely to get amplified during the time of domestic turbulence. The paper, therefore recommends that policymakers should look inward whenever policy discuss revolves around the increasing integration of financial markets to save the economy from aggravation of contagion
Institution and Housing Development: Mirage, Magic and Miracle of Low- Cost Housing in Nigeria
No full textThe article examines housing development with reference to the challenges encountered by the various low- cost housing interventions in Nigeria. The article observed that despite institutional interventions from both the fiscal and monetary authorities, the Nigerian housing deficit still remains a challenge to the government, stakeholders and the citizen. Challenges of adequate access to housing finance include affordability, access to land, cost of construction, rising cost of construction resources (materials and labour). The first section contextualises the challenges of the Nigerian housing deficit in the milieu of population explosion and urbanisation. The second section examines the theoretical issues bordering on the perspectives on how housing should be treated either as economic good or social good. The third section examines the institutional efforts and progress achieved. In the fourth section, the empirical facts that showed that housing cost is on the increase and significant progress would be made if the real sector issues bordering on the fundamentals of cost and process are squarely given sufficient space in the provision of affordable housing. The final and concluding section proposes a real sector inclusive approach that will require the concerted effort of all stakeholders aimed at reducing the cost of housing construction in Nigeria
Imputation of Missing Values in Economic and Financial Time Series Data Using Five Principal Component Analysis Approaches
No full textThis study assesses five approaches for imputing missing values. The evaluated methods include Singular Value Decomposition Imputation (svdPCA), Bayesian imputation (bPCA), Probabilistic imputation (pPCA), Non-Linear Iterative Partial Least squares imputation (nipalsPCA) and Local Least Square imputation (llsPCA). A 5%, 10%, 15% and 20% missing data were created under a missing completely at random (MCAR) assumption using five (5) variables: Net Foreign Assets (NFA), Credit to Core Private Sector (CCP), Reserve Money (RM), Narrow Money (M1), Private Sector Demand Deposits (PSDD), from 1981 to 2019 using R-software. The five imputation methods were used to estimate the artificially generated missing values. The performances of the PCA imputation approaches were evaluated based on the Mean Forecast Error (MFE), Root Mean Squared Error (RMSE) and Normalized Root Mean Squared Error (NRMSE) criteria. The result suggests that the bPCA, llsPCA and pPCA methods performed better than other imputation methods with the bPCA being the more appropriate method and llsPCA, the best method as it appears to be more stable than others in terms of the proportion of missingness
Issues, Challenges, and Prospects in the Housing Sector: Operator’s Perspective
No full textThis article provides an operator’s perspective on the issues, challenges, and prospects in the housing sector in Nigeria. Topics covered include existing housing situation in Nigeria; and issues and challenges affecting affordable housing in Nigeria. The article also examines the prospects for Nigeria housing sector and made key recommendations which include: Creating enabling policies around land title documentations; Fast track the passage of foreclosure bill into law to legally resolve default issues in the sector; Advance the ongoing partnership between the Mortgage Banking Association of Nigeria (MBAN) and the Central Bank of Nigeria (CBN) with regards to the underwriting standards which can increase housing and mortgage affordability for the masses; Building the right skill ecosystem through job-driven training programmes; Institutionalisation of collaboration and partnerships between large scale industry players to enhance mass housing provision and affordability; Creating standard data base in African countries, especially in Nigeria; and Policy creation, adoption and financing of sustainable buildings that utilise green approach in construction which integrates topography into developments
Strengthening Institutions for Housing Delivery in Nigeria
No full textThis article discusses innovative structural reforms and investments that can improve housing delivery in Nigeria. Following this introduction, we would focus on the issue of housing as a fundamental human right, then a review of housing developments in Nigeria. In examining how to improve housing delivery in Nigeria, the article underscores the need for strengthening public institutions through the application of appropriate policies that would enhance optimum utilisation of existing resources for efficient housing delivery. The article highlights the need for renewed collaboration and commitment particularly among stakeholders and putting in place, specific workable institutional arrangements that would enhance sound policy making environment that would facilitate infrastructural development alongside efficient housing delivery and housing sector development in Nigeria. These were considered in Sections 4 and 5, by looking at institutional and policy issues; and perspectives for sustaining housing delivery in Nigeria