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An Analysis of the Monetary Policy Transmission Mechanism and the Real Economy in Nigeria
No full textThe study is an empirical analysis which seeks to explain the monetary policy transmission mechanism to the real economy in Nigeria. It examines the process by which the interest rate policy of the Central Bank of Nigeria actually affects the structure of interest rates, credit, aggregate demand and output production and, hence, changes in inflation rate. In the analysis, we review the paradigm of the channels of monetary policy transmission mechanism by studying over two and-half dozen cases of empirical studies in the economic literature. By applying vector auto-regression (VAR) with dynamic logarithmic form and the ordinary least squares (OLS) methods, the empirical functional relationships of the macroeconomic variables in the process were captured. It is found that, of all the channels, the credit channel in the financial market for credit supply and accessibility to the private sector provide the effect of a linchpin in the process by which monetary policy transmits to the real economy. However, interest rate and exchange rate channels during the period (1981 – 2008) appeared to have had a weak effect on the real economy. It is, accordingly, suggested that credit supply and accessibility to the real productive sector of the economy in Nigeria should be radically reformed and strengthened with appropriate regulatory measures, while still maintaining the Monetary Policy Rate as the monetary policy anchor to effect changes in the interest rate structure, credit and exchange rate in the real economy
The Role of Central Bank of Nigeria’s Analytical Balance Sheet and Monetary Survey in Monetary Policy Implementation
No full textThis paper discusses the significance of Central Bank of Nigeria’s (CBN) monetary aggregates in the implementation of monetary policy. The Analytical Balance Sheet and monetary survey are shown to be useful tools in the analysis of monetary and credit developments in the economy. It also discusses the role of the aggregates in monetary policy implementation through the adjusted money multiplier, which explains how policy actions of the CBN influence the broad money supply. Finally, the paper attempts to estimate the Taylor-type monetary policy reaction function for Nigeria using the monetary policy rate and reserve money since December 2006 when the monetary policy rate was first introduced by the Bank. The paper finds that the reaction function fits the actual policy performance of real monetary policy rate and reserve money as the implied paths of the reaction functions fit the actual paths of the policy variables rather closely. Keyword
Viable agent banking and mobile payment system in Nigeria
No full textAgent banking and Mobile payments, especially in developing economies are rapidly evolving and having tremendous impact on the economies and lives of its citizenry. In addition to reducing costs, these new service offering channel help to encourage customers to use financial services more often, as locations are close by and in places where the customers are familiar with. In light of the afore-mentioned, the Central Bank of Nigeria noted the rapid growth of mobile telephony and the need to leverage existing business network infrastructure as a practical and well thought-out strategy for driving financial inclusion of the unbanked in Nigeria
On the Derivation of Estimators of Foster-Greer-Thorbecke (FGT) Poverty Indices
No full textPoverty analysis has relied heavily on data in summarized form and this has created dearth of knowledge on the statistical properties of Foster-Greer-Thorbecke (FGT) poverty indices. This study derived estimators of FGT poverty indices from first principles in an attempt to provide an insight into some intrinsic characteristics of FGT indices. The estimators are found to be reasonably unbiased and consistent. The estimates of the indices obtained from the estimators are approximately 53%, 22% and 12% for the head count, poverty gap and square poverty gap indices. From the conventional method, the estimates are approximately 52%, 21% and 11% respectively. The results therefore establish the validity of the derived estimators as adequate alternative measures of the three basic poverty dimensions of proportion, depth and severity
Investigating Chaos in the Nigerian Asset and Resource Management (ARM) Discovery Fund
No full textThis paper investigates chaos in a Nigerian mutual fund, Asset and Resource Management Company Limited (ARM) for a period of eleven years. The existence of chaotic signals in the data was identified by the reconstruction of the phase space of the daily closing price of the fund and the delay time was quantified using mutual information function and the embedding dimension by the false nearest neighbours, where the values were identified to be 15 and 20 respectively. The presence of chaotic signals in the ARM data was further confirmed by the correlation dimension method which yielded a dimension of 2.2 and by the Lyapunov exponent, in which the largest Lyapunov exponent is 0.0528. The predictability of the fund was evaluated from the inverse of the largest Lyapunov exponent as 19 days
Time Series Modeling of Nigeria External Reserves
No full textThis paper discusses the levels and trend of external reserves in Nigeria. The relevance of this lies in the fact that it could help to monitor the reserves and throw early warning signal about any economic crisis. Monthly data on Nigeria external reserves for the period January 1999 to December, 2008 derived from the 2008 CBN Statistical Bulletin was analyzed using ARIMA model. Results of the analyses show that (i) the data requires logarithmic transformation to stabilize the variance and make the distribution normal (ii) the appropriate model that best describes the pattern in the transformed data is the Autoregressive- Integrated Moving Average process of order (2,1,0). This model is recommended for use until further analysis proves otherwise
A panel Analysis of Oil Price Dynamics, Fiscal Stance and Macroeconomic Effects: The Case of some Selected African Countries
No full textThe study makes use of quarterly data that spans the period from 1990:q1 to 2010:q4. A panel vector autoregressive (PVAR) technique was employed to examine the impact of oil price dynamics on the economic performance of five (5) oil exporting countries in Africa. The countries are: Algeria, Angola, Egypt, Libya and Nigeria. In order to achieve this, the study used the following variables: Oil price volatility, real gross domestic product (real GDP), fiscal deficit, gross investment and money supply shocks. The impulse response functions show that of all the macroeconomic variables considered, gross investment responds more to oil price volatility than fiscal deficit, real GDP and money supply. On the whole, the findings suggest that gross investment is the main channel through which oil price dynamics influenced the macroeconomic performance of these economies
Determinants of Bilateral Trade Performance of the Member Countries of the West African Monetary Zone (WAMZ)
No full textThis study sought to identify the drivers of import demand in the region, as a basis for proposing achievable alternative strategies for enhancing the level of intra-regional trade in the Zone. The study estimated a global import trade model for the Zone to establish the key determinants of its import demand. Using the pooled regression technique, the study analyzed quarterly data spanning the period 1985 to 2012, for the five original member countries of the WAMZ. The following is a highlight of the outcome of the analyses: given its positive sign and significance, trade liberalisation has the potential of boosting intraregional trade and improving the welfare of the citizens; nominal exchange rate is a significant factor in the demand for imports in the Zone; its significance and negative sign show that exchange rate movements have negative impact on bilateral intra-WAMZ trade, with implications for incurring avoidable foreign exchange transaction costs; positive signs of both domestic and foreign economic growth proxy variable (GDP) indicated that economic growth in the Zone, as well as its foreign trading partners, is generally accompanied by increase in the demand for import by members. Based on these findings, the study recommended, among others, that policy-makers in the Zone should deemphasize individual exchange controls in favour of adopting a common exchange rate mechanism as a way of reducing transaction costs associated with trading with each other through a third party currency
Domestic Credit Growth and International Capital Flows: Implications for Monetary Policy Management in Nigeria
No full textThis paper investigates the effect of foreign capital flows on domestic credit growth, specifically, and its implication for monetary policy. The paper is structured into 6 sections. Section 2 provides the review of related theoretical and empirical literature. Section 3 provides stylized facts on the structure and changing structure of domestic credit and international capital flows in Nigeria while section 4 deals with capital flows and the dynamics of monetary policy in Nigeria. Section 5 provides the empirical analysis, while section 6 concludes the study
Exchange Rate Pass-Through to Domestic Prices in Nigeria: An Empirical Investigation
No full textThis paper uses the impulse response from an estimated structural autoregressive model of the inflation process to estimate the dynamic exchange rate pass-through to consumer prices for Nigeria, using quarterly data for the period 1986-20I0. The results suggest that the exchange rate pass-through is incomplete, low and fairly slow. On impact, for instance, the elasticity of inflation to exchange rate changes is about 0.02, and it takes about eight quarters to reach its full-impact of only 0.26. We argue that given the large share of imports in Nigeria\u27s consumption basket, this surprisingly low pass-through indicates that importers practice the so-called pricing-to-market strategy of price setting for the Nigerian market. The variance decomposition analysis suggests that money supply has contributed more to Nigeria\u27s inflation process relative to the exchange rate. This suggests that policy makers must beep up efforts at achieving monetary stability