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Issues in Central Bank communication
No full textThis article examines salient issues in communication which is a key aspect of Central Banking. Although, the value of communication has been hitherto ignored, it has become evident over time that, for a central bank to succeed in achieving its set objectives and mandates, it must put in place effective and efficient mechanisms needed in crafting, and disseminating information about its policies. The ability of the central banks to identify their stakeholders and address their unique communication needs will enable them to earn the trust of their stakeholders and portray them as transparent and accountable entities
Determinants of Economic Growth in Nigeria
No full textThis paper investigates the role of Frazer Economic Freedom Index on FDI-growth relationship over the period spanning 1980 through 2010 using annual time series data. A Multivariate Regression approach was employed to estimate augmented growth models. Quite intriguingly, the impact of disaggregated economic freedom over aggregated composite index was found profoundly revealing. Emanated results show that the same set of variables like labour, life expectancy, degree of openness and economic freedom are factors affecting the level of economic growth in both but at different levels of significance. However, the estimates of disaggregated components of economic freedom data show that the size of government (negative effects) and freedom to trade internationally (positive effects) appears as significant out of five variables making the composite (aggregated) index. The following are therefore suggested for policy applications: curbing unfettered liberalization in the degree of openness, improving and strengthening of the components of economic freedom index, specifically, through reduction in excessive government intervention and that more budgetary allocations should be channeled towards health delivery schemes and education promoting activities since the likelihood of elongating life expectancy is in tandem with such exercises
Modeling and Forecasting Currency in Circulation for Liquidity Management in Nigeria
No full textThis paper presents forecasts of currency in circulation prepared for liquidity management at the Central Bank of Nigeria. Forecasts were produced using ARIMA, ARIMA with structural variables, VAR and VEC models. The performance of the forecasts was then evaluated under a rolling forecast scenario, where the estimation sample is augmented by one observation and the forecast sample is brought forward. The evaluation of the forecasts was based on average performance over a number of rolling forecasts. We found that the most accurate models were mixed models with structural as well as ARIMA components, augmented by seasonal and dummy variables. We also found that the exchange rate, interbank rate, seasonality, holidays and elections were significant in explaining the demand for currency
Empirical exposition of monetary policy under fixed and managed float exchange rate regime: any lesson for Nigeria
No full textThe paper empirically investigated the relationship between monetary aggregates and the exchange rate under alternative exchange rate regimes in Nigeria. Using data spanning 1961 to 2013 to estimate vector auto-regressive (VAR) models, a number of findings ensued
Exchange rates, capital flows and monetary policy: lessons from emerging market economies
No full textThis paper proceeds in four sections as follows: section 1 is the introduction, section 2 gives a cursory summary of the literature on the \u27trilemma-dilemma\u27 that tend more towards the relevance of capital controls as an independent instrument in monetary policy irrespective of the exchange rate regime, while section 3 examines the evidence and effectiveness of the management of the process and relationships in emerging market economies (EME). Section 4 examines a country experience, while section 5 draws inferences for Nigeria and section 6 concludes with recommendations
Quality of governance and stock market performance: the Nigerian experience
No full textThe paper examines the impact of governance on stock market performance using quarterly data series spanning 1996Q1 to 2010Q4. An ARDL bound testing methodology was employed to explore such causal relationship. Long-run stable relationships were established through the error correction terms of each of the measures used to the tune of -0.4821,-0.4034 and -0.4080 for all share price index, market capitalisation and the value of total stock traded, respectively. Findings indicate that macroeconomic and financial stability should be constantly maintained and promoted as it constitutes a drag on the stock performance; any acts of corruption should be eschewed as it scares away potential investors into the country and the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government\u27s commitment to such policies should be enhanced altogether
An examination of the structural inflation dynamics in Nigeria
No full textThe attainment and sustenance of price stability defined as single digit inflation is expected to create an enabling environment for the growth of the real sector. This has been one of the cardinal goals of the Central Bank of Nigeria’s monetary policy, since its establishment in 1958. However, in most of the years the attainment of this objective had been elusive as episodes of very high inflation roles were prevalent, especially in the 1980s and I990s in Nigeria. Among other issues, the Central Bank of Nigeria has regarded inflation as monetary phenomenon, requiring management of monetary aggregates as a means of price stability. Persistent high rates of inflation despite sluggish growth in monetary aggregates suggest that there could be other drivers of inflation outside of monetary factors. Against this backdrop, this study examines the dynamics of inflation in Nigeria, including the structural evolution as well as the direction of its movement with a view to designing appropriate policy measures to rein in the inflationary pressures. Following Argy (1970) and Mosho (1996), four (4) hypotheses of structural variables namely: agricultural bottleneck, demand shift, export variability, and foreign exchange scarcity were tested. The study utilised quarterly data from 1970(1) to 2013 (4) except for Bureau de Change (BDC) premium where the duration was 1991(1) to 2013 (4) based on Auto Regressive Distributed Lag (ARDL) model. The results show that structural factors like budget deficit, rainfall, variation in export, exchange rate premium hove profound influence on movement in CPI in Nigeria during the period. Exchange rate premium appears to significantly influence inflation in both the short- and long run equations while most of the other structural variables ore significant only in the long-run. The study therefore concludes that the monetary authority should incorporate structural variables in its inflation modes in order to holistically rein in inflationary pressures in Nigeria
Developing Banking System Stability Index for Nigeria
No full textThis study constructed a banking system stability index (BSSI) for Nigeria, using a combination of financial soundness indicators and macro-fundamentals. It applied statistical and Conference Board Methodology normalisation processes on Nigeria’s banking and macroeconomic data from 2007Q1 to 2012Q2. The resultant index traced fairly well the episodes of crisis in the system over the study period. Hence, the BSSI is capable of acting as an early warning mechanism of signaling fragility. It could, therefore, be used as a complimentary regulatory policy tool to detect potential threat to enable monetary authorities take timely pre-emptive policy measures to avert crisis
Oil Price Shocks and Real Exchange Rate Movement in Nigeria
No full textThis paper investigated the relationship between oil price and real exchange rate movement in Nigeria. Crude oil exports account for over 90 per cent of Nigeria\u27s foreign exchange earnings hence, the economy may be vulnerable to instability in international oil prices, which the country as a small open economy, cannot influence. Using monthly data covering the period 2000 to 2013, this study employs GARCH process to test the relationship between oil price and exchange rate volatility in Nigeria. The results of GARCH (1,1) and EGARCH (1,1) suggest the persistence of volatility between real oil prices and the real exchange rate. The Smooth Transition Regression (STR) results also show the expected reaction from the exchange rate following changes in oil prices. Thus, we conclude that oil price fluctuations lead exchange rates movement in Nigeria
An examination of the structural inflation dynamics in Nigeria
No full textThis study examines the dynamics of inflation in Nigeria, including the structural evolution as well as the direction of its movement with a view to designing appropriate policy measures to rein in the inflationary pressures. The study utilized quarterly data from 1970(1) to 2013 (4) except for Bureau de Change (BDC) premium where the duration was 1991(1) to 2013 (4) based on Auto Regressive Distributed Lag (ARDL) model. The results show that structural factors like budget deficit, rainfall, variation in export, exchange rate premium have profound influence on movement in CPI in Nigeria during the period