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Coping with Capital Flow Volatility: Policy Consideration for Nigeria
No full textForeign capital flows have, from time to time, elicited deep concerns and debates because of their tendency to be volatile besides various macroeconomic and other related effects. Generally, the volatility of capital flows, especially in the form of huge surges pose significant risks and raise concerns about excessive exchange rate appreciation and the corresponding adverse impact on exports and growth
Protecting the Whole: A Review
No full textThe aftermath of the 2007 global financial crisis marked a turning point in financial system regulation, generating a renewed interest among global regulators in the use of macroprudential policy to promote financial system stability. In this regard, the article discussed some shortcomings of traditional regulation and promoted the need for a broader and systemic approach to financial system stability using both traditional (micro-prudential) and non-traditional (macroprudential) policies. The paper further discussed the elements of macroprudential policy and tools used to mitigate risks and vulnerabilities in the financial system. A summary of the article is presented in section II and comments are highlighted in section Ill
How would non-interest banking affect the effectiveness of monetary policy in Nigeria
No full textThis article espouses the effectiveness of monetary policy in a dual economic framework (interest bearing/non-interest bearing). In other words it examines how the element non-interest banking when combined with interest bearing framework affect the effectiveness of monetary policy. The use of interest based instruments can effectively be combined with the identified non-interest interest instrument to conduct monetary policy. This article recommend that Nigeria should start thinking towards a policy that takes into account the monetary aggregate instruments as the main tool for executing monetary policy
The role of financial literacy and consumer protection in fostering financial inclusion
No full textThe objective of this paper is to establish the link on how financial consumer protection efforts and financial literacy initiatives help bring people on board the formal financial system. Among the key mandate of the Central Bank of Nigeria (CBN) is the promotion of a sound financial system, while a stable financial system cannot be easily captured in a few words, the attributes that could be demonstrated in a system that is described as financially stable will include public confidence and trust in the institutional framework. Financial stability, therefore, serves to instill confidence in users of financial services. It encourages and facilitate productive economic activities and contribute to the overall wellbeing and progress of the society
Monetary Policy Rule: A Broad Monetary Conditions Index for Nigeria
No full textTo determine the relative importance of both the domestic and external influences on monetary policy formulation, this paper constructs a broad monetary conditions index for Nigeria. It brings together the three key channels of monetary transmission, namely interest rate, exchange rate and credit channels. The result gives dominance to exchange rate channel, followed by credit channel and interest rate channel. The resultant monetary conditions index traces fairly well the policy direction of the Central Bank of Nigeria for the studied period, hence can serve as an adequate gauge of monetary policy stance of the Bank
Structural Change and Real Output Growth in Nigeria: A Cointegration Analysis
No full textThe study employed the Johansen (1988) and the Johansen and Juselius (1990) multivariate maximum likelihood method within a Vector Autoregressive framework to explore the impact of structural reforms on the level of real output in Nigeria. We fit the equation separately for two sub-samples, the pre-reform and the market-reform periods, to enable comparisons of the outcomes under alternative policy regimes. We further estimate the model using data that covered the entire sample period to evaluate the total effects and include a dummy variable to capture the impact of the policy shift. The Johansen cointegration test confirms the existence of long-run equilibrium relationships among the variables. Various diagnostic tests conducted confirmed the robustness of the results. The Chow Breakpoint test rejected the null hypothesis, which states that the real output function remained the same before and after structural reforms. The results of our parsimonious models suggest that real exchange rate, real credit to the private sector and the previous level of real output are the most consistent drivers of real income in Nigeria. The long-run Granger causality test supports that the above variables could help predict the future level of real output. Since it is evident that the price system cannot guarantee the desired moderation in interest rates, the monetary authorities need to take extra measures to reduce interest rates in different segments of the market. Government can also play complementary roles by limiting the size of budget deficits to cut down on huge domestic borrowing, which now runs into trillions of naira. This will not only improve investment but will go a long way to free additional credit for onward lending to the private sector. The present stability in the foreign exchange market also needs be sustained to forestall any further depreciation in the exchange rate. Above all, more stable sources of foreign exchange need to be urgently sought if the monetary authorities are to meet the ever increasing demand for foreign exchange to stabilise rates in the market
Managing the Downside Risks of Surging Capital Flows on Financial Stability for Sub-Saharan African Countries
No full textThis paper discusses how capital flows has affected the sub-Saharan Africa. It also highlights the fundamental and growth prospects that are likely to continue drawing capital inflow in the future as well as the risk associated with it
Capital Flows and Macroeconomic Stability: Theoretical and Conceptual Considerations
No full textThis article examines the impact of foreign capital flow in industrialised countries. The theoretical foundation for the proposition that capital flows can promote macroeconomic performance and stability of emerging economies was entrenched in the 2-gap model, which posits that development may be hampered by the existence of both the savings and foreign exchange gaps in the developing countries
Effect of Deposit Money Banks\u27 Credit on the Performance of Micro, Small and Medium Enterprises in Nigeria
No full textThis paper set out to empirically evaluate the effect of deposit money banks\u27 credit on the performance of MSMEs in Nigeria, with the aid of a vector autoregression and error correction mechanism (ECM) technique. Results of the empirical investigation confirmed credit had a positive effect on GDP of MSMEs in Nigeria as the coefficient of CAM (credit to MSMEs) was positive (1.0569) and significant at 1.0 per cent level. It was, therefore, recommended that every effort should be made to improve access to credit by MSMEs, so that they could play their potential roles of employment generation and wealth creation and move the majority of the entrepreneurs out of poverty
Empirical examination of foreign capital flows and growth nexus in emerging economies
No full textThe purpose of this paper is to analyse the effect of foreign capital flows on economic performance in three ways. First, it analyses empirically the direct effect of capital account liberalisation on growth; second, it continues to explore the subject by testing one of the indirect effects of capital flows on economic welfare, namely their influence on competitiveness; and finally, it breaks down the issue further by decomposing capital flows into their specific elements – FDI, portfolio investments, aid, debt, remittances and tests their effect on competitiveness