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Macroeconomic shocks and fiscal deficit behaviour in Nigeria: a VECM approach.
No full textThis paper focuses on establishing the links between fiscal deficit and short-term changes in major macroeconomic variables like real output, interest rate, exchange rate, inflation rate and crude oil price in Nigeria. Empirical results show that the model adequately explains the behaviour of government of fiscal deficit and that while the accumulation of deficit is not at all detrimental to the economy per se, prudence should be exercised in the financing options adopted and more so the appropriate application of such funds to selffinancing projects. It is recommended that government broaden its tax-net to curb the surging borrowing as well as prevent the current fiscal challenges from cascading into a full scale fiscal crisis. Finally, budget making should not be assumed to a mere accounting exercise only, instead the process should be focused on developing both physical and human capital through a carefully thought out socio-economic development framework
An Assessment of Monetary Policy Response To Capital Inflows in Nigeria1
No full textLarge and persistent capital inflows can be a double-edged sword. Accompanying its many attractions is the tendency to display a boom and bust pattern (volatility and reversals) in addition to the possibility of causing rapid exchange rate appreciation, inflation and loss of monetary policy independence. These downside risks create very strong impetus for some sort of policy response like sterilization, fiscal consolidation or controls. This study employs a simple analytical framework to estimate the intensity (and effectiveness) of monetary sterilization by the Central Bank of Nigeria (CBN) in response to increased capital inflows in recent years. The study finds evidence of less-than-full, but significantly high sterilization intensity, albeit no indication of sterilization smoothing by the Bank. The paper reports also, evidence of slacking sterilization over time, attributable in part to cost and financial system stability considerations. Rising cost of sterilization, especially, could soon undermine the sustainability of the current approach, predicated on a heavy reliance on market operations, should inflows of the magnitudes observed in the past persist. The situation calls for adoption of supplementary measures
On Numerical Solution for Optimal Allocation of Investment funds in Portfolio Selection Problem
No full textIn this article, we present a procedure for obtaining an optimal solution to the Markowitz’s mean-variance portfolio selection problem based on the analytical solution developed in a previous research that lead to the emergence of an important model known as the Black Model. The procedure is well presented, illustrated and validated by a numerical example from real stocks dataset obtainable from a popular European stock market
Inflation and Economic Growth in Nigeria: Detecting the Threshold Level
No full textThis paper re-examines the issue of the existence and the level of inflation threshold in the relationship between inflation and growth in Nigeria, using three different approaches that provide appropriate procedures for estimating the threshold level and inference. While Sarel’s (1996) approach provides a threshold point estimate of 9.9 per cent that was not well identified by the data, the technique of Khan and Senhadji (2001) identifies a 10.5 per cent inflation threshold as statistically significant to explain the inflation-growth nexus in Nigeria. Also, the approach of Drukker et al (2005) suggests a two threshold point model with 11.2 and 12.0 per cent as the appropriate inflation threshold points. These results suggest that the threshold level of inflation above which inflation is inimical to growth is estimated at 10.5 to 12 per cent for Nigeria. Using the estimated two threshold point model, this paper did not find enough reasons to accept the null hypothesis of the superneutrality of money, and therefore, suggest that there is a threshold level of inflation above which money is not super-neutral
A Business Cycle Model for Nigeria
No full textThe current global financial meltdown draws, once again, attention to the existence of business cycle fluctuations. Experts are of the view that the ongoing crisis is far deeper than the great depression of the 1930s. It should be recalled that the Keynes and Keynesianism was a response to that depression. Therefore, the objective of this paper is to develop a small business cycle model in the spirit of Dynamic Stochastic General Equilibrium (DSGE) model for Nigeria designed to examine the sources of business cycles, and use the model for policy analysis. This paper considers the implications of three policy shocks namely: monetary supply, technology and export supply on some macroeconomic aggregates. While the paper adopts the Nason and Cogley (1994) and Schorfheide (2000) models, it, however, introduces export sector into the model with a view to capturing the transmission channel of terms of trade. The method of estimation is the Bayesian and the paper uses DYNARE codes (dyn_mat_v4). The results obtained in this study show that the Nigerian business cycle is driven by both real and nominal shocks
Oil Price Pass-Through into Inflation: Empirical Evidence from Nigeria
No full textThe objective of the paper is to empirically investigate the oil price pass-through into inflation in Nigeria in order to suggest appropriate domestic policies necessary to control inflation for the policy makers. The study also attempts to answer questions like: What is the causal links between oil price and inflation in Nigeria? Is oil price highly correlated with inflation? What does the result of an estimation of a Phillips curve tell us about the pass-through for oil in Nigeria. The methodology adopted by the paper is a standard pass-through equation in the form of an autoregressive distributed lag (ARDL) model and quarterly series from 1990 - 2010 were used for the estimation. The estimation results indicate that changes in oil price have had significant effects on inflation. Other findings are that inflation has been influenced by exchange rate changes and changes in broad money supply and maximum lending rate
Keynote Address by Sanusi L. Sanusi
No full textKeynote address by the Central Bank of Nigeria Governor Sanusi Lamido Sanusi at the 2012 Executive Seminar jointly organized by the Research and Human Resource Departments of the CBN titled Macro-Prudential Framework and Financial System Stability in Nigeria
Evaluating adverse effects of supply shocks on monetary policy: evidence from Nigeria
No full textThis paper applied structural VAR to identify supply shocks (defined as sudden impulses to crude oil prices) for the Nigerian economy from l990 Q1 to 2011 Q4. Results indicated that oil price modeled as supply shocks statistically influences some key macroeconomic variables and consequently shapes monetary policy direction. Price of crude oil exerted influence on monetary policy role, real GDP and real non-oil GDP. The effect of oil price shock on inflation, real oil GDP and nominal interest role was not significant. Developments in the foreign exchange market and real GDP comparatively exerted more influence on the monetary policy directive; reason adduced to this is the volatility of the exchange rate and the fact that inflation eventually is on off shoot of GDP. The monetary policy direction should therefore focus on those variables with high level of volatility as their influence impact heavily on economic activities. The effect of oil price shock was more pronounced on real GDP with longer lag effects on the monetary policy rote. Also, variations in real gross domestic product were explained by the activities of the monetary authorities indicating that reduced interest rate impact strongly on gross domestic product
Iran-the chronicles of the subsidy reform: a review.
No full textThe paper re-examines the planning and early implementation of energy subsidy reform officially referred to as Targeted Subsidies Reform in lran. The paper also evaluates the sequencing of the arrangement and concludes by reviewing the main challenges for the restoration of macroeconomic stability and the efficient and effective functioning of the corporate sector
Special Remarks by Sarah O. Alade
No full textSpecial Remarks by the Deputy Governor Economic Policy Directorate of the CBN at the opening ceremony of the annual in-house Executive Seminar (2012) on Macro-Prudential Framework and Financial System Stability in Nigeria, jointly organised by the Research and Human Resources Departments