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Estimation of Disaggregated Import Demand Functions for Nigeria
No full textThis paper estimates disaggregated import demand function for Nigeria using annual data from 1970 to 2019. The study employs the Zivot-Andrews unit root and Gregory-Hansen cointegration tests to account for the role of structural breaks and the error correction mechanism for shortrun analysis, respectively. The results show that household consumption, industrial output and domestic investment are the major determinants of import demand for consumer, intermediate and investment goods, respectively. Furthermore, the import demand for investment goods is not sensitive to variations in relative prices. However, relative prices is negative and significant to import demand for consumer and intermediate goods. Exchange rate is negative and significant only in import demand for investment goods. Moreso, structural break plays a vital role in modelling all categories of import demand in Nigeria. The study recommends that the managed floating exchange rate regime should be sustained to influence the import demand for consumer and capital goods, while the import demand for intermediate goods should be encouraged since domestic production relies heavily on imported inputs. In addition, the policymakers should take cognizance of the role of structural breaks when formulating import demand policies
Microfinance Sustainability in a Digitalised Economy
No full textThe study examines microfinance sustainability in a digitalised economy using a panel dataset of 1,314 microfinance banks in Nigeria spanning 2012 to 2020. The results show that digitalisation poses significant threats to microfinance sustainability in Nigeria. The industry presently faces strong competition from commercial banks and Fintech companies, and is characterised by a low capital base, product innovation and market penetration, high transaction costs, and some idiosyncratic risks. The study suggests that microfinance institutions should leverage their large customer base by utilising digital innovations. Regulatory agencies should ensure that Fintech services are adequately regulated, affordable, and easily accessible to microfinance institutions. This would allow the microfinance industry to operate at a reduced transaction cost, increase its outreach to the poor, minimise risks and enhance sustainability
Twin Deficits in Nigeria: Where Does the Exchange Rate Fit?
No full textThis study investigates the twin deficits hypothesis for Nigeria while accounting for the role of exchange rate. The study utilises annual data series spanning 1981 to 2019 and the ARDL modelling technique for the estimations. Among other findings, the study reveals the existence of a bi-directional causation between current account deficit and fiscal deficit. Similarly, a positive relationship was seen to exist between current account balance and fiscal balance in both the short-run and long-run during periods of exchange rate appreciation and depreciation, thus confirming the role of exchange rate in the twin deficit hypothesis in Nigeria. The study recommends the introduction of a debt ceiling for governments, an improvement in the efforts towards non-oil export promotion, minimising imports and improving revenue generation
Does the Okun\u27s Law Hold in the BRICS Countries and Nigeria?
No full textThe unemployment-output nexus is a topical issue in developing countries, particularly with some evidence against the trade-off suggested by Okun’s law. This study, therefore, investigates the validity of Okun’s law in the BRICS countries and Nigeria, based on annual data between 1993 and 2020, using the Panel ARDL model. We validate the Okun’s law with evidence of an inverse relationship between output and unemployment in the BRICS countries and Nigeria. We, therefore, recommend that policymakers should boost both nominal and potential output by fully diversifying the economy to enhance productivity and reduction in the unemployment rate. We also recommend that the BRICS countries and Nigeria should deploy more of their population into technology-driven economic activities such as the information and communication technology (ICT) sub-sector of the economy and productive sectors that are labour intensive such as agriculture to absorb the available labour and boost output and lower unemployment rate
Implications of the African Continental Free Trade Area for Nigeria’s Economic Growth
No full textThe objective of this paper is to examine the effect of intra-African Trade on Nigeria’s economic growth from 1981 to 2019. To achieve this, the ARDL modeling technique is employed to investigate the short-run and long-run effects of intra-African trade on Nigeria’s economic growth. The study finds that though the short-run effect is positive but not significant; the long-run effect is significantly positive, and robust to alternative estimation techniques. This suggests that expansion of trade among African countries, which is expected to result from the full implementation of the African Continental Free Trade Agreement (AfCFTA), would have positive growth effect on Nigeria in the long-run. Furthermore, positive and significant long-run real output effects of capital formation, exchange rate and population, as well as negative and significant long-run real output effect of inflation are observed. Evidence from out-of-sample simulation based on a three-equation system of simultaneous equations model shows that expansion of intra-African trade will (potentially) contribute to the growth of the Nigerian economy. Based on these findings, we recommend strong commitment to the implementation of the Free Trade Agreement, improvement of the investment climate, moderation of inflation and establishment of a stable exchange rate system, as well as development of a knowledge-base of the population to improve the performance of the Nigerian economy in the years ahead
Digital Technology and the Transformation of the Nigerian Banking System: the operators’ perspective
No full textThe rapid development of digital technology through the years, and the rails provided by the internet for connectivity remains the most important development that has impacted change and driven massive improvement in the operation of banking and financial services. It has brought in its wake huge disruptions in product roll-out and the way products are delivered. The entry of technology companies into financial services cannot be overlooked in discussing these changes. Nigeria has not been left behind in this evolution. Instead, the Nigerian banking industry has been the forerunner in digital initiatives in Africa that have transformed the banking and financial services landscape in the past years. The Payment System Vision (PSV) project from 2007 has been an important catalyst in this transformation of the Nigerian payments system. Similar transformation initiatives in trade services have resulted in the creation of innovative products/services and infrastructure resulting in enhancement in speed and efficiency in service delivery, security, as well as convenience to consumers. The emergence of new technologies has continued to shape or disrupt life as it is known in different sectors. The face of banking today, the interconnection between players and interoperability have benefited from these emerging technologies. This paper will be reviewing global digitisation trends, underlying technologies, the Nigerian context, and the state of banking infrastructure today. It will also look at the emerging new technologies that will or should define the future of financial services in Nigeria, the current state of play, and the need to ride the wave of global trends to define the way into the future
Effect of FDI Inflows on Employment Generation in Selected ECOWAS Countries: Heterogeneous Panel Analysis
No full textThe aim of this study is to examine the effect of FDI on employment in ECOWAS sub region between 1990 and 2019. The study utilizes a panel autoregressive distributed lag model to analyse the short run and long run relationship between FDI and employment across ECOWAS sub region. In the short run, the impact of FDI on employment is negative and statistically not significant. Meanwhile, in the long run FDI has a positive and statistically significant impact on employment rate. This implies that FDI has the capacity to generate employment in countries in ECOWAS sub region. Therefore, this study recommends that policymakers in the ECOWAS sub region should facilitate the achievement of productive, employment and decent work for all, policy measure that will facilitate the inflows of FDI should be embarked upon
Impact of COVID-19 Pandemic on the Nigeria Stock Market: A Sectoral Stock Prices Analysis
No full textThis study examines the impact of the COVID-19 pandemic on sectoral stock prices in Nigeria stock market using daily data covering from February 28, 2020 to June 26, 2020. Applying the autoregressive distributed lag (ARDL) bounds test, the study finds that COVID-19 pandemic had adverse impact on the stock market indices in the short run. Furthermore, the study documents negative response of sectoral stock prices to the pandemic while the stock prices of the banking sub-sector are the worst hit. Compared to the consumer goods, and industrial subsector indices, the speed of adjustment to long run equilibrium is faster for the banking, subsector. Results from sensitivity analysis also indicate that the stock market responds negatively to the pandemic when the number of confirmed COVID-19 deaths is used. However, the stock market performance is more sensitive to the total number of confirmed cases than the total number of confirmed deaths. This implies that the market responds quickly to the pandemic. This paper, therefore, concludes that the COVID-19 pandemic had negative and heterogenous impacts on sectoral stock prices in Nigeria during the first wave of the pandemic
Big Data and Inflation Forecasting in Nigeria: a text mining application.
No full textThe success of monetary policy is substantially predicated on the availability of reliable forecast of inflation. However, the shocks arising from COVID-19 and the Russia-Ukraine war have brought about significant economic uncertainties; thus, necessitating the fine-tuning of existing forecasting models of the Central Bank of Nigeria. This study explores the usefulness of public sentiments obtained using machine learning methods to improve the predictive power of the existing short-term inflation forecasting model (STIF) in Nigeria. Findings indicate that, for all components of inflation, models that include the computed sentiment index perform better in both in-sample and out-sample forecasts than those excluding the index. Thus, we conclude that sentiment-based inflation forecasting models are useful for improving the headline inflation forecast and suggest the use of forward guidance monetary instruments in the form of “open mouth operations”, to ensure economic agents’ sentiments are well anchored
Public Debt Sustainability Measures and Its Growth Implications for the Nigerian Economy
No full textThis study utilises the linear and nonlinear autoregressive distributed lag (ARDL) models to investigate the impact of public debt sustainability measures and its growth implications for the Nigerian economy from 1981 and 2021. The results suggest that public debt-to-oil revenue ratio (PDOR) has a significantly negative effect on economic growth both in the long- and short-run. It also shows that public debt-to-non-oil revenue ratio has an asymmetric effect in the short-run and a positive relationship on economic growth in the long-run. The study concludes that economic growth needs to be enhanced through improved government non-oil revenue. Therefore, to bolster economic growth, the Nigerian government needs to improve revenue generation through non-oil industry by encouraging private investments and widening the tax net