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The Impact of Private Sector Credit on Economic Growth in Nigeria
No full textThe paper determines empirically the local conditions and policy environment that influence the absorptive capacity of credit in the Nigerian economy for the period 1993:Q1 to 2013:Q4 using fully modified least squares. Findings show that credit is growth-enhancing, even when trade openness, monetary policy, investment climate and infrastructure are low. Also, the composite local condition index analysis revealed that private sector credit increased economic growth when domestic or local conditions were favourable and the absorptive capacity of the domestic economy for credit was estimated at 29% of the GDP in 2013. These results suggest that there is ample room for growthenhancing credit expansion in Nigeria
Macroeconomic Instability Index and Threshold for the Nigerian Economy
No full textThe paper employed statistical algorithms, factor analysis and threshold autoregressive models to address the gaps in management of macroeconomic instability in Nigeria. Using data spanning 2010q1 to 2017q2, the findings showed that the values of macroeconomic instability index (MII) fluctuated between 0.316 and 0.609, with a threshold of 0.461. This showed an inverse relationship between macroeconomic instability and economic growth. This framework could serve as a mechanism to gauge early warning signal of instability in Nigeria
Transforming the mortgage sub-sector using the FSS 2020 platform
No full textThis paper examines the Mortgage sector of FSS2020 Strategy document which falls within the category of the drivers of the FSS2020 Strategy implementation blueprint. FSS2020 Mortgage: Vision and Mission. The paper further explores the Strategic Objectives of FSS2020 Mortgage Sector and the Transformational Programmes which includes: Ml - Establish a secondary mortgage market; M2 - Attract affordable international credit to fund affordable housing programmes; M3 - Advocate for mortgage ready and affordable housing. Three Transformational Programmes were designed to support the realization of the three objectives of the Mortgage Sector namely: TPl - Establishment of Mortgage Refinancing Companies (MRC) TP2 - SPV for the Development of Affordable Housing Clusters TP3 - Mortgage Asset Registry System (MARS) It is to be noted that Strategic objective M1 is supported by TP1; Strategic objective M2 is supported by IP2 while Strategic objective M3 is aligned to Tp3. The paper concluded with a description of the end-state of the Nigerian mortgage market by the year 2020 is therefore depicted with the following outlook: (a) Nigeria would have developed a mortgage market that is safe and profitable. A market that would have provided access to housing finance to over 30% at Nigerians in all social closes in urban centres to own their own houses; (b) a market that has multiple long-term funding sources including full integration with the Nigerian capital market where the value of listed mortgage backed securities will be at 20% of the market capitalisation of equities; (c) a market that would account for about 15% of the gross domestic product of the country, stimulating construction activities with attendant multipliers and providing up to l0% of the population with jobs. (d) a market that would provide Iong-term financing facility for mortgages of low interest rate and accessible to all classes of Nigerians
Savings, Net Foreign Assets and Current Accounts Dynamics in SubSaharan Africa
No full textA profile of the current account balance in sub-Sahara Africa (SSA) shows that many countries in the region have consistently experienced current account deficits, dwindling savings and diminishing net foreign assets. These macroeconomic variables convey important information to economic agents about the health of a nation. The relationships among these three important variables in terms of short-run and long-run dynamics are cloudy in the literature. Therefore, this study examined the long-run and short-run dynamics of savings, net foreign assets and current account balance in subSaharan Africa. Utilising panel econometric techniques with annual data from 38 countries in SSA for the period 1980 to 2013, it was found that savings and net foreign assets impact positively on the current account balance, while foreign direct investment, population growth and dependency ratio had negative impact on current account balance. These findings implied that African governments, desirous of improving their current account balance, must institute policies aimed at increasing savings and net foreign assets and properly manage foreign direct investment, as well as population growth and dependency ratio
Interest Rate Dynamics and Real Output Behaviour in Nigeria: A Simulation Analysis
No full textThe declining output growth observed from the second quarter of 2014, which led to calls for a more expansionary monetary policy despite rising inflationary pressure, necessitated a reassessment of the impact of interest rate on real output growth in Nigeria. Using a Bayesian Vector Autoregressive (BVAR) model and quarterly data from 2000:Q4 to 2015:Q3, the effect of monetary policy transmission (interest rate dynamics) on real output performance was estimated. Although results of the simulation analysis were somewhat mixed, those of the impulse response functions indicated that positive shocks to monetary policy rate (MPR) produced a negative and small impact on output. Specifically, reducing the MPR from 13 to 10 per cent, would lead to an increase in output growth from 2.35 per cent in 2015Q3 to 3.84 per cent in 2016Q3. However, when the MPR was raised from 13 to 14 per cent, output grew albeit at a slower rate from 2.35 to 3.16 per cent during the same period. The authors concluded that policy rate adjustment could be used as a major tool to boost output growth, especially if inflation is low and stable
Determination of Optimal Foreign Exchange Reserves for Nigeria
No full textThe study examined the optimal level of international reserves for Nigeria that is capable of absorbing a shock similar to that experienced during the 2007/2009 Global economic crisis. Using, generalised autoregressive conditional heteroscedasticity (GARCH), vector autoregressive (VAR) estimation techniques and normalised Johansen cointegrated equation, and setting the maximum and minimum output losses for the entire period, the study found a positive relationship between the odds of default on sovereign debt and fiscal deficit to GDP ratio, short-term debt to reserves ratio and volatility in portfolio investments. In minimising the Bank\u27s cost of holding reserves, the study found that the Nigerian economy required the minimum “core” foreign reserves level of US$32 billion to absorb adequately similar external shocks to the economy. The study found that while actual reserves had been above the optimal reserves level between 2008Q1 – 2014Q1, the average “core” reserves available to the economy was however, insufficient to absorb the adverse economic impact of financial crises, if they occur in the future. The study, therefore, recommended, amongst others, the need to block leakages to foreign reserves, facilitate fiscal consolidation and export diversification and improve the macroeconomic fundamentals of the Nigerian economy
Contemporary issues in the Nigerian monetary policy landscape: current challenges and strategic options
No full textContemporary central bonking in Nigeria is becoming laced with intricacies, and monetary actions impacting every segment of the society. Paradoxically, monetary policy landscape is characterized by complexities and frequent changes in the monetary environment amidst relatively constant monetary instruments. The economic recession witnessed by Nigeria from Q1 to Q4 of 2016 had reinforced the renaissance of primordial and \u27nativist\u27 models of unregulated banking arrangement cum investment options via Ponzi schemes and pyramid schemes, flexible exchange rote regime, selected import forex restrictions, calls for unconventional monetary policy with special reference to negative interest rote, central bonk communication and financial stability concern. This catalyzes another seismic rethink in conventional monetary policy management in Nigeria along with policy implication. Nevertheless, the strategic options available to central bonkers in Nigeria ore relatively new and untested in the monetary policy landscape in Nigeria. More worrisome, is the fact thot the current challenges ore incompatible, intertwined and reinforcing. Understanding the current trends and issues bedeviling monetary policy is critical to central bonkers in Nigeria, because, monetary actions premised on faulty theoretical knowledge would further exacerbate rother thon mitigate the already stressed economy with unintended consequences. Therefore, the paper recommends that Central bankers in Nigeria must be abreast of the fundamental implications of the new reality
An application of Box-Jenkins approach in forecasting Nigerian crude oil prices.
No full textNigerian government has been adopting Moving Average (MA) method in pegging crude oil price benchmark. However, large discrepancy between the projected oil price benchmark and the actual international crude oil prices is observed over time. Therefore, the main objective of this research is to investigate whether Box-Jenkins approach could provide a lasting solution to the problem of inefficient oil price forecast in the Nigerian budgeting process. In our quest for an appropriate oil benchmark, monthly bonny light crude oil prices for the period of April 1986 to December 2015 are used
Transforming the insurance sector in Nigeriain using the FSS 2020 platform
No full textThe National lnsurance Commission (NAICOM) is the statutory Regulatory body of insurance business created to ensure the effective administration, supervision and regulation of insurance business and regulate transactions between insurers and reinsurers within and outside Nigeria. FSS 2020 Insurance Sector, in collaboration with NAICOM aims to deepen the insurance market; ensure lnsurance credibility and protect policy holders; Embed governance and risk management framework for the lnsurance Companies; Enhance access to finance (financial inclusion) with business development support and new products; and risk-based capitalization of lnsurance Companies
Assessing Systemic Risk in the Nigerian Interbank Money Market
No full textThe interbank market is an important platform for strengthening financial integration. It also represents a medium for risk sharing among banks through the linkages and common exposures. Exposure between banks leads to a direct asset relation through borrowing from each other at the interbank market while banks are associated indirectly through ownership and sharing of similar portfolio exposures, that connects them, through a web of transaction network. The paper analysed the systemic risk implied in the Nigerian interbank network, based on various network measures using data on individual banks\u27 bilateral exposures. The findings showed that few banks featured prominently in the analysis, owing to their level of exposures and the effect of these varying exposures on their capital base. In addition, the linkages between two prominent banks and other banks were exposed. Moreover, a scenario of two banks failing was observed, which could spark up the chain of other failures with contagion second-round effects. The study could be useful in the development of a monitoring system by the supervisory authorities, as well as in strengthening the bank-internal stress tests of default contagion