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Is Real Exchange Rate Misalignment a Leading Indicator of Currency Crises in Nigeria?
No full textThis paper constructs an early warning system for currency crises in Nigeria based on selected key macroeconomic indicators. It estimates the probabilities of currency crises as a logistic function of the included variables within the framework of a logit model. Particularly, the extent to which real exchange rate misalignment (RERMIS) could be used as a leading indicator of currency crisis is investigated by including its lag in the model. Our findings show that the likelihood of currency crisis increases when the real exchange rate is misaligned; the exchange rate is volatile; oil price declines; debt/GDP ratio increases; and the current account balance to GDP ratio declines. The study confirms that RERMIS represents a useful leading indicator of currency crisis in the country. The paper therefore recommends regular assessment of the Naira exchange rate vis-à-vis its equilibrium level with a view to implementing appropriate policy responses to rein in or avoid prolonged and substantial misalignments. Since all the variables enter the equation in their one period lags, the estimated model constitutes a reliable early warning system to policy makers on the possibility of impending currency crisis in the country
Destination Sectors and Originating Economies of Nigeria’s Private Foreign Assets and Liabilities in 2013
No full textThe survey of foreign assets and liabilities of enterprises in Nigeria was conducted in 2014 to determine the 2013 stock of foreign assets/liabilities of Nigerian enterprises, as well as receiving sectors and origination/destination regions. The survey collected relevant information from 740 enterprises, and analysis of survey returns indicated that the total private foreign liabilities as at end-2013 was N12, 639.27 billion up by 5.08 per cent above its level in 2012. Of this total, 96.7 per cent was in the form of foreign direct investments, while foreign portfolio investments and other capital flows accounted for 0.4 and 2.9 per cent, respectively. About 43 per cent of the total foreign liabilities originated from Europe, while 22.0 per cent and 15.9 per cent were from Asia, and the North Atlantic and Caribbean, respectively. The Nigerian extractive sector continued to be the preferred investment sector to foreign investors as it attracted 45.5 per cent of the total foreign capital stock. The stock of outward investments as at end-2013 was N837.84 billion, representing a decline of 7.7 per cent below its level in 2012. The decline was largely accounted for by the 29.46 per cent drop in foreign assets holding of the extractive sector. European and North American countries were the preferred investment destinations for Nigerian investors as the regions jointly attracted about 49.1 per cent of total outflows, while African countries received 23.4 percent (N195.89 billion) of the total
The role of central banks during economic downturn: lessons and options for financing government programmes in Nigeria
No full textThe author examine both the traditional and developmental roles central banks plays in financing government programmes/projects
Financng government programmes during economic downturn: policy options
No full textThe author discussed various policy options that can be adopted to finance government programmes during economic downturn. He explained in details the concept as it affects the economic growth and development
Effects of monetary policy on the banking system stability in Nigeria
No full textThe paper examined the effect of monetary policy on banking system stability in Nigeria. The main objective was to evaluate how monetary policy affected the banking system stability during the global financial crisis in Nigeria. Static and dynamic error correction models were estimated using monthly data from January 2007 to June 2013 and the error correction model was found most efficient. The banking system stability index was computed using banking soundness index, banking vulnerability index and economic climate index. The results showed that increase in monetary policy rate, depreciation of nominal exchange rate and rising inflation rate negatively affected the banking system stability
Financing government programmes in economic downturn: theoretical issues and perspectives
No full textThe purpose of this paper is to articulate the theoretical issues and perspectives which underscore the need for caution in financing government programmes whether in the recurrent outlay or capital programmes as individual financing modes have built in costs and risks that could inhibit the realisation of government objectives
An overview of CBN intervention in the Nigerian economy (2009 - Date)
No full textThe author emphasize the major role the central bank of Nigeria plays in the socio- economic development of the country through various interventions. He stated historically that, the Bank had been involved in development financing since 1962
Monetary policy and asset prices in Nigeria
No full textThis paper attempts to contribute to the debate on the linkages between monetary policy and asset prices in the woke of the recent global financial crisis. The study employs vector error correction (VEC) mode! on Nigerian weekly data from January 2007 to October 2013. A pair-wise granger causality test indicated a unidirectional causality from asset prices to monetary policy. Exchange rate at lag one was negatively related to the All Share Index. suggesting that exchange rate appreciation is likely to lead to excessive appreciation in asset prices. The results further indicated a positive relationship between financial system stability and asset prices. The variance decomposition indicated that monetary policy rate (MPR) accounted for the largest variation in AS! followed by exchange rate and financial system instability. A key conclusion was thot the monetary policy rate had significant impact on asset prices. Notably, the CBN policy rate monetary policy influenced asset prices significantly as from the fourth week for both the All Share index returns (ASIr) and the NSE 30 return. The results also showed that the predominant sources of asset price volatility were due largely to interest rate shocks, exchange rate shocks and financial system stability. Thus, the authorities should as a matter of priority, continue to provide forward guidance for anchor investors’ expectations and the direction of the market as well as put downward pressure and help improve broader financial conditions
Technical Notes on Balance of Payments Compilation and Analysis: The Case of Nigeria
No full textThis paper discusses some technical issues in Balance of Payment compilation and analysis. It summarized major components of the BOP statistics, the various account balances as well as the interrelationship between them and other macroeconomic aggregates. It goes further to discuss data related issues in the compilation of Nigeria’s BOP statistics with the aim of providing better insight to future/new compilers, policy and other economic analysts
Sources and impact of excess liquidity on monetary policy in Nigeria
No full textThis paper examined the sources and effects of excess liquidity in the Nigerian banking system. The Deposit Money Banks (DMBs) in Nigeria do not hold voluntary reserve over and above the required reserve for precautionary reasons depending on their risk appetite. The practice over the years has been that DMBs constrained themselves by holding involuntary reserve which is a major concerns to the monetary authorities. The ideal situation is that banks should deploy excess reserves as loans to the public and invest in government securities, but on the contrary this is not done based on the profit maximisation tendencies of the DMBs. The Ordinary Least Squares (OLS) estimation result using monthly data from 2002 – 2012 showed that banks foreign assets and government deposits were important contributors to observed excess liquidity in the system. Government deposit featured as a key determinant of the demand for excess reserves. The paper also found a positive relationship between excess reserves and inflation