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Causal Relationship between Stock Market Index and Exchange Rate: Evidence from Nigeria
No full textThis paper uses Johansen’s cointegration to test for the possibility of cointegration and Granger-causality to estimate the causal relationship between stock market index and monetary indicators (exchange rate and M2) before and during the global financial crisis for Nigeria, using monthly data for the period 2001–2011. Results suggest absence of long-run relationship before and during the crisis. The Granger-causality tests show a uni-directional causality running from M2 to ASI before the crisis while during the period of the crisis there is absence of causality between the variables. This suggests that ASI show responsiveness to M2. Thus, absence of the direct linkage between ASI and Exchange rate shows that the market is inefficient and perhaps not derived or guided by the fundamentals
Modeling the Nigerian Inflation Rates Using Periodogram and Fourier Series Analysis
No full textThis work considers the application of Periodogram and Fourier Series Analysis to model all-items monthly inflation rates in Nigeria from 2003 to 2011. The main objectives are to identify inflation cycles, fit a suitable model to the data and make forecasts of future values. To achieve these objectives, monthly all-items inflation rates for the period were obtained from the Central Bank of Nigeria (CBN) website. Periodogram and Fourier series methods of analysis are used to analyze the data. Based on the analysis, it was found that inflation cycle within the period was fifty one (51) months, which coincides with the two administrations within the period. Further, appropriate significant Fourier series model comprising the trend, seasonal and error components is fitted to the data and this model is further used to make forecast of the inflation rates for thirteen months. These forecasts compare favourably with the actual values for the thirteen month
Special remarks at the CBN Executive Seminar on Global Capital Flows, Financial Markets and Macroeconomic Stability
No full textThis is a special remark delivered at the Seminar on Global Capital Flows, Financial Markets and Macroeconomic Stability. The seminar provided the opportunity for Executives of the Bank, to engage in productive exchange of views and ideas on the subject, and to reflect on both the positive impacts and the inherent risks
Determinants of Income Velocity of Money in Nigeria
No full textIn this paper, the authors set out to empirically investigate the determinants of income velocity of money in Nigeria, using quarterly time series from 1985:1 to 2012:4. The paper confirms a positive and statistically significant relationship between the growth of income and the velocity of money, which supports the quantity theory of money. Interest rate also has a positive and significant relationship with the income velocity of money. The financial sector development variable adopted, growth rate of stock market capitalization, has a negative relationship with the income velocity of money. The variance decomposition and impulse response results identified inflation rate as the most significant variable to innovations in the income velocity. The results show that the monetary authority cannot obtain additional leverage by issuing more money without generating high inflationary pressure
The Role of Governance on Private Investment in Nigeria: A Preliminary Analysis
No full textThe paper sets out to investigate the role of governance on domestic private investment in Nigeria using Auto-Regressive Distributed Log (ARDL) Bounds Testing Approach to ascertain long-run association on an annual data covering the 1970 to 2010 period. Emanated from the estimated models are intriguing findings which showed clearly that difference exists between long and short run determinants of domestic private investment. In the former, degree of openness, previous value of inflation rates and governance indicators are the most important factors but political stability and voice and accountability indicators appear to dominate the governance indicators space as they are both negative and significantly affecting the private investment mobilization. In the latter, savings, real GDP, degree of openness, real interest rates, inflation rates and governance measures are strong determining variables on private investment mobilization. Of the governance indicators however, political stability stood out prominently. A few relatable implications for policy are highlighted for the attention of policymakers
The Relationship between Domestic Savings and Investment: The Feldstein-Horioka Test Using Nigerian Data
No full textThis study explores the relationship between savings and investment in Nigeria during the period 1980-2011. Unlike previous studies, this study employed Autoregressive Distributed Lag (ARDL) Bounds testing approach to test for long run relationship. The short-run dynamics are also captured from error correction model (ECM).The results of the Bounds test suggest that there is a long run relationship between savings and investment. This result is consistent with a number of earlier studies reviewed in the literature that found saving and investment to be cointegrated in the long run. The results also support the Feldstein-Horioka (1980) hypothesis that postulates low capital mobility internationally
An Aggregate Import Demand Function for Nigeria: An Auto-Regressive Distributed Lag (ARDL) Approach
No full textThe paper sought to examine the dynamics underlying the high import bills in Nigeria and proffered appropriate policy recommendations. In achieving this, the Autoregressive Distributed Lag (ARDL) technique was utilised to estimate the aggregate import demand function for Nigeria using the quarterly data covering the period 1970 to 2011. The paper found that the coefficients of external reserves, domestic consumer prices, level of income and exchange rate were all statistically significant, suggesting that these variables were important factors determining the level of imports in Nigeria. The short-run elasticity result revealed that Nigeria\u27s aggregate demand for imports was both price and income elastic; implying that import demand would increase as the level of economic activity and domestic prices increased. Furthermore, the coefficient of the speed of adjustment revealed that it would take about 0.05 years for imports to respond to changes in any of the explanatory variables. The paper, therefore recommended appropriate fiscal policy measures to address the high level of consumer goods imports since it accounted for about 45.0 per cent of total imports between 2006 and 2011
Fuel subsidy and other unproductive public expenditures removal: a pragmatic approach to restructure and transform the Nigerian economy
No full textWhile the short term measures to reduce recurrent expenditure are necessary conditions for fiscal sustainability, the long term imperative is to increase revenue. Thus, efforts should be made by the fiscal authorities in Nigeria to pursue the policy of balancing of expenditure with revenue improvements. The issues of the underperformance of the capital budget should be reversed before savings from cuts in recurrent expenditure can be diverted to the financing of capital expenditure. From the analysis, we say that removal of fuel subsidy would no doubt have some social and economic hardship on the people in the short run, However, if the above recommendations are put in place, the gains that are consequent upon the removal would improve the economy and the protest and threats of labor would be avoided. Consequently, the economy will be disengaged from the stigma and economic quagmire that had hampered the Nigerian economy from experiencing real economic growth/development
Financial inclusion in Nigeria: measurements and lessons
No full textThe operations of financial systems are crucial to people’s savings, credit, payment and risk management needs. More importantly, the inclusiveness of this system tends to benefit the poor and other disadvantaged groups in the society (Demirguckunt and Klapper, 2012). In the definition of the Centre for Financial Inclusion, “Full Financial Inclusion is a state in which all people who can use them have access to a suite of quality financial services, provided at affordable prices, in a convenient manner, and with dignity for the client” (Gardeva and Rynne, 2011). This entails building a financial system that serves as many people as possible (AFI, 2010). Increased savings can be engendered by including the poor and disadvantaged groups in the formal financial system. Given their large numbers, this small saving group represents a means of financial diversification which can enhance financial stability and economic growth of a country. However, when financial development is not entirely inclusive; especially when it tilts heavily towards the wealthy (Cull and Demirguc-Kunt, 2012), it may dampen economic growth. This paper, therefore, identifies different measures of financial inclusion and their strengths and goes on to discuss results on their application to measuring the degree of financial inclusion in Nigeria. The draws lessons on how other countries have expanded their financial inclusion and measurement strategies. Each of these objectives is therefore treated in separate sections of the paper
Financial Inclusion in Nigeria: issues and challenges
No full textFinancial Inclusion is a state where financial services are delivered by a range of providers, mostly the private sector, to reach everyone who could use them. Specifically, it means a financial system that serves as many people as possible in a country. In recent time, financial Inclusion has assumed a critical development policy priority in many countries, particularly in developing economies. This paper reviewed experiences of other jurisdictions in the achievement of financial inclusion. More importantly, the various country experiences showed that, though financial inclusion may have become a general phenomenon, its nature, form and challenges differ among jurisdictions and as such cannot be addressed by a single product or “one size fit all” approach. Nations should therefore implement initiatives that take into consideration the peculiarities of their environments and most critically its local people. It further reviewed past and present efforts at promoting financial inclusion in Nigeria. Although gradual progress is being made to improve on financial inclusion, critical challenges of low financial literacy, inadequate infrastructural facilities as well as inadequate and inefficient technology-based facilities by financial institutions, has limited the achievement of significant expansion in financial inclusion level in Nigeria. This study recommends a systematic approach that aligns responsibility and institutions among all stakeholders in the financial inclusion process to guarantee sustainability