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Banking Regulation and Risk Management: An Assessment of the BASEL Market Risk Framework
No full textThe article covers instruments and requirements of bank regulation, bank regulation and risk management, Basel I Capital Accord, Basel II Capital Accord, Basel III Capital Accord, Basel Accord and market risk framework, the proposed changes of the Basel III Accord, Basel Accord and Market Risk Framework. The author concludes by saying that the Basel Framework lays emphasis on the relevance of risk management and tries to link the minimum capital requirements of internationally active banks with the amount of tail risk in their trading books
Transmission of exchange rate shocks into domestic pries does it exist for Nigeria
No full textThe study re-examined the transmission of exchange shock into domestic prices in Nigeria. The non-recursive Structural VAR methodology was employed to examine long-run pass-through of exchange rate to domestic inflation. It found from the result of the lRFs that exchange rate pass-through to domestic prices in Nigeria do exist; and is incomplete. The results further shows that the response of core inflation to shocks in nominal exchange rate was more pronounced and persistent over time than the headline inflation. Using FEVD, the study found that exchange rate and supply constraints are key drivers of domestic prices in Nigeria. The study therefore recommends proactive exchange rate policies that promote stability and induce non-tradable activities in the domestic economy. Also, the economy needs to be restructured in favour of exports and reduce importation of foreign goods
Threshold Effect of Inflation on Economic Growth in Nigeria
No full textIt is widely believed that price stability promote long-term economic growth, whereas high inflation is inimical to growth. This paper utilized a quarterly time series data for the period 1981 – 2009 to estimate a threshold level of inflation for Nigeria. Using a threshold regression model developed by Khan and Senhadji (2001), the study estimated a threshold inflation level of 13 per cent for Nigeria. Below the threshold level, inflation has a mild effect on economic activities, while above it, the magnitude of the negative effect of inflation on growth was high. The negative and significant relationship between inflation and economic growth for inflation rates both below and above the threshold level is robust with respect to changes in econometric methodology, additional explanatory variables and changes in data frequency. These finding are essential for monetary policy formulation as it provide a guide for the policy makers to choose an optimal target for inflation, which is consistent with long-term sustainable economic growth goals of the country
Quality Statistics in Banking Reforms for National Transformation
No full textThis paper outlines the important role of statistics in aiding proper planning and achievement of sustainable economic development. The paper elaborates the importance of investing in quality and reliable statistics for policy design and implementation and stresses the vital role statistical information play in effective operation in both private and public sector in every economy. The role of quality, reliable and timely information to a well-functioning financial system and as a guide to monetary policy making is illustrated in the paper. The paper credits accurate statistical information to the success of the Nigerian banking sector reform. However, it suggests that in Nigeria, while considerable progress has been made in improving the gathering and processing of statistical data, more needs to be done to sensitize the general public on vital role of statistics in economic planning and monitoring of policy implementations
Estimation of Interest Elasticity Model for Aggregate Commercial Bank Deposits in Nigeria (1986-2008)
No full textThe Nigerian government deregulated the financial market in 1987 in line with the McKinnon-Shaw financial liberalization paradigm. However, the subsequent policy reversal after the introduction of the structural adjustment programme has made the effect of interest rate on aggregate commercial bank deposits (CBD) mobilized unclear. This study is based on the pioneering work of Egboro (2004) who initially examined the appropriateness of these policy summersaults with data ending in 1999. However, in this present study we re-estimated an interest elasticity model of commercial bank deposits in Nigeria by employing more recent data that captured subsequent changes in the nation’s financial landscape. The econometric technique applied is the two-stage least squares (2SLS) regression method given that the system of simultaneous equations is over-identified. The Statistical Bulletin of the Central Bank of Nigeria constitutes the source of data. Inter alia, the findings indicate that there is an inverse and statistically significant relationship between CBD and deposit interest rates. This relationship is inelastic in the short-run but elastic in the long-run. One of the important implications of the study is that the McKinnon-Shaw financial liberalization paradigm for less developed countries does not hold in Nigeria. Therefore, it may be concluded that there is presently no scope to use the lure of higher deposit rates to significantly stimulate increased commercial bank deposits in Nigeria
Systemic Surveillance and use of Macro-Prudential Indicators
No full textThis paper examines the practice of systemic surveillance through macro-prudential analyses and use of macro-prudential indicators. The rest of the paper is divided into 6 parts. Part 2 discusses macro-prudential (MP) surveillance; Part 3 covers the key methodologies and approaches while the MP indicators are x-rayed in Part 4. Part 5 reviews Nigerian experience with macro-prudential indicators (MPIs). Part 6 examines other issues in systemic surveillance and the paper is concluded in part 7
Preliminary Pages of conference proceedings of the seminar on Macro-Prudential Framework and Financial System Stability in Nigeria, for CBN Executive Staff
No full textLeadership and Corporate Governance: Challenges for Bank Regulators
No full textGiven likely challenges to obtaining legislative approvals on acceptable behaviour as foundational to good corporate governance practices, this paper recognizes the attendant challenges for bank regulators and recommends measures that Nigerian bank regulators can explore in enhancing their effectiveness in advocating for and where necessary, enforcing good corporate governance practices, based on universally defined pillars and elements of corporate governance
The effectiveness of monetary policy ln Nigeria: an empirical investigation
No full textThe paper has attempted to assess the effectiveness of monetary policy in Nigeria between 1986 and 2012, against concerns over the inelasticity of real sector variables to monetary policy shocks. It applied a vector autoregressive (VAR) methodology to answer two questions: what is the role of monetary policy on the growth of output, inflation and the nominal exchange rate in Nigeria and is there a price puzzle attributable to monetary policy in Nigeria? Subject to the restrictions imposed by the data sample and the six variables specified, the study found that monetary policy was effective in the period of study; it explained movement in output, inflation and the exchange rate. Specifically, it found no output or price puzzled associated with monetary policy in Nigeria but that an exchange rate puzzle is established, suggesting that domestic monetary policy might only be partly responsible for variation in the exchange rate in the country
Demand for foreign exchange reserves in Nigeria: a cointegration approach
No full textThere have been significant accretions to foreign exchange reserves over the last decade in Nigeria, especially since the return to democratic governance in 1999. The study tries to find out the underlying factors driving the demand for reserves by the monetary authority. To estimate the demand for foreign exchange reserves in Nigeria, Johansen cointegration and error correction methodology was utilized for the period 1985:Q 1-20I0:O4. The results show that the long-run demand for foreign exchange reserves in Nigeria is driven by economic size, capital account vulnerability, exchange rate flexibility and opportunity cost. In the short-run, the major determinant of demand for foreign exchange reserves in Nigeria is current account vulnerability. This implies that foreign exchange reserves should be held as a precaution against current account vulnerability since Nigeria is a high import-dependent country. The study recommends that policy should be tailored towards accumulating reserves during oil boom to serve as a buffer against external shocks and that trade policy should discourage heavy importation of consumption goods in favour of domestic locally produced consumption of locally produced goods