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A Predictive Model for Inflation in Nigeria
No full textThe study estimates a dynamic model using quarterly data spanning 1995 to 2016. Four dynamic models: level lagged variables, differenced lagged variables, log-transformed lagged variables and differenced log-transformed lagged variables were considered. The best predictive model was selected based on the Schwarz Information Criterion (SIC) value. From the empirical results, the level form models performed better than the differenced form models. On the basis of model parsimony, the level lagged model was the preferred model among the set of selected models. Predictions obtained from the model indicate that the model is stable as actual interest rate (IR) values, fall well within the computed 95% prediction interval. The study concludes that previous values of IR and money supply (MS) are significant in predicting future inflation rates in Nigeria
Understanding economic recession, the role and limitations of monetary policy in recovery
No full textThis article examines the causes and effect of economic recession, highlights the role of monetary policy in economic recovery from a recession and proposes appropriate policy options to address the menace of recession with a view to promote economic recovery. Following the introduction, section 2 addresses the definition, causes, features and brief history, section 3 discuss recent economic recession in Nigeria, section 4 highlights the role of monetary policy and section 5 concludes the paper
A Reassessment of Money Demand in Nigeria
No full textThis paper re-examines broad money (M2) demand and its stability in Nigeria using the Autoregressive Distributed Lag (ARDL) bounds testing procedure. First, the results indicate that a stable long-run relationship exists between M2 and its determinants including GDP, stock prices, foreign interest rates and real exchange rate. Furthermore, stock prices showed a significant and positive effect on the long-run broad money demand, which in some ways reflect increased ‘financialization’3 and integration of the Nigerian economy into the global economic system. Overall, the findings of this study lend credence to the continued relevance of the broad money aggregate, M2, as a benchmark for monetary policy implementation in Nigeria
Modelling Volatility Persistence and Asymmetry of Naira-Dollar Exchange Rate
No full textThis paper modelled the volatility persistence and asymmetry of naira-dollar exchange rate in interbank and Bureau de Change (BDC) using monthly data between January 2004 and November 2017. The study employed Generalized Autoregressive Conditional Heteroscedasticity [GARCH (1,1)], Threshold GARCH [TGARCH (1,1)] and Exponential GARCH [EGARCH (1,1)]. The results of Bai-Perron (2003) structural break identified two significant breaks in each market. Interestingly, the breaks, particularly for the interbank exchange rate(December, 2014 and January, 2015), seem to have coincided with the period of depreciation in the country’s exchange rate which could be linked to the precipitous movement in the international crude oil prices. The findings showed that persistence is generally explosive in the BDC market as compared to interbank market where the persistence was high but not explosive especially under asymmetric models. Based on our model selection criteria, the symmetric GARCH model, appears to be better than the asymmetric ones in dealing with exchange rate volatility in the interbank market while asymmetric GARCH, especially TGARCH, seems to be better in the case of BDC market. By implication, it is important that the monetary authority considers the developments and reactions of the markets to news most especially the BDC, when designing appropriate exchange rate policies for the country
Modeling Volatility Persistence and Asymmetry with Exogenous Breaks in the Nigerian Stock Returns
No full textThis study examines the volatility persistence and asymmetry with exogenous breaks in Nigerian stock market. The study utilizes daily closing quotations of stock prices from the Nigerian stock exchange for the period 3rd July, 1999 to 12th June, 2017. Standard symmetric GARCH (1,1), asymmetric EGARCH (1,1) and GJR-GARCH (1,1) models with and without structural breaks were employed to measure shocks persistence and leverage effects in the presence of varying distributional assumptions. The empirical findings showed high persistence of shocks in the return series for the estimated models. However, the study found significant reduction in shocks persistence when structural breaks were incorporated in the estimated models. Empirical evidence for the existence of asymmetry without leverage effect was found in Nigerian stock market. The EGARCH (1,1) model with student-t innovation density was found to fit the data better than other competing models. The study recommends the incorporation of structural breaks while estimating volatility in the Nigerian stock market. This will help to avoid over-estimation of volatility shocks and restore investor’s confidence in the stock market
Does changes in monetary policy rate in Nigeria have effect on the interest rates? recent evidence
No full textThe objective of this study is to find out whether changes in Monetary Policy Rate have any impact on interest rates in Nigeria. The study adopted Multiple Linear Regression Analysis to examine the effectiveness of changes in Monetary Policy Rate on movement in short term and long term rates in Nigeria. The study concludes that the MPR influences the 91-Day Treasury Bills rate to the greatest extent followed by the Inter-Bank Call rate. The results obtained from this study can be used to gauge the effectiveness of MPR in an economy like Nigeria where financial infrastructure is not fully developed
Can Islamic Banking and Finance Spur Financial Inclusion? evidence from Sub-Saharan Africa
No full textThis study examined the effect of introduction of Islamic banking and finance on financial inclusion in Sub-Sahara Africa (SSA). To achieve this objective, the study applied Probit, Tobit and Juhn-Murphy-Pierce decomposition to estimate model of financial inclusion. The study used World Bank’s Global Financial inclusion index (Global Findex) dataset of 2015. The findings revealed that the introduction of Islamic banking and finance system in some Organization of Islamic Cooperation (OIC) countries in SSA enhanced financial inclusion in the sub-region. The study also uncovers that households from OIC with Islamic banking and finance are more likely to be financially included than their counterparts in OIC countries without Islamic banking and finance. Further, there are other factors that play an important role in determining the probability of financial inclusion in the region. Inter alia, these factors include age, gender, income level and level of education. The policy implication of the findings is that introducing Islamic banking and finance is necessary for spurring financial inclusion in OIC of SSA
Assessing Efficiency in the Pharmaceutical Sector of Nigeria
No full textThe study analyses, empirically, the efficiency of the Pharmaceutical sector in Nigeria. Employing a balanced panel of 20 pharmaceutical firms between 2012 and 2016, the paper uses a non-parametric technique (Data Envelopment Analysis) to analyze the firms’ efficiency under the constant returns to scale (CRS) and variable returns to scale (VRS) assumptions. The results obtained shows inefficiency in the pharmaceutical sector as it operates under a decreasing return to scale. This calls for an appropriate policy mix to stimulate the efficiency of the pharmaceutical sector in Nigeria by enhancing research and development (R&D) as ell as regulations within the sector
An overview of the cheque payments system in Nigeria
No full textThis paper is designed to examine critically the modern trends in the cheque payments system in Nigeria. In the light of this, the paper is divided into nine parts. The second part of the paper examines the concepts of payment , clearing and settlement. The evolution of cheque clearing in Nigeria is examined in part three. The part four presents the cheque standard in Nigeria. The part five gives the synopsis of cheque payment in Nigeria while the cheque truncation system(CTS) and its benefits and challenges are examined in part six and part seven respectively. The paper concludes with recommendations and conclusion in part eight
Demystifying the microeconomic foundation of economic development in Nigeria: evidence from ease of doing business index
No full textThe welfare of the citizenry in a modern economy depends critically on the state of the consumer behaviour of the household and the production decisions of business firms. Despite the efforts of the monetary authorities in supporting the micro-components of the economy and invariably improving the Ease of Doing Business in the country, very little has been done to evaluate their appropriateness in stimulating economic development. Against this backdrop, this paper critically examines the impact of supporting the microeconomic units on economic development in Nigeria