Tag Archives: CBN

The role of the regulatory and supervising authorities in preventing bank failure and ensuring banking stability In the Organisation of Banking Sector in Nigeria (Published)

The word “prevention of failure” according to advance learner’s dictionary connotes taking proactive measures in stopping something ugly from happening. A stable banking system means that the banks are making adequate profits from authorized banking business to justify their investment and at the same time bank failures are kept at a minimum within the country. By minimum failures is meant the number of failures whose solution cost would not exceed what the supervisory authorities could consider tolerable. It is therefore important to emphasize that failure is not necessarily synonymous with instability in the banking system. As a matter of fact, technically insolvent banks are expected to be resolved as they are detected so that the cost of such resolutions would not escalate. Also, if bank failure is not contagious, then the banking industry could be considered stable. Generally, it is agreed that an efficient banking system is a pre-requisite for an efficient economy in view of the importance of the banking sector.

 

Keywords: AMCON, Banks’, CBN, FG, NDIC

CBN Monetary Policy and Inflation Nexus in Nigeria: An empirical approach (Published)

The study explored monetary policy effect on inflation stabilization in Nigeria. Increasing levels of indebtedness may have reduced the fiscal space for fiscal policy intervention and this leaves monetary policy as the real tool of choice for macroeconomic stabilisation. The question we need to ask then is, how effective is this tool of choice? Monthly time series data from 2009-2018 were used in estimating the model. The ADF test for the stationarity, the johansen cointegration test and the vector error correction model were utilized in testing the variables. The findings from the unit root test did indicate stationarity at first difference 1(1). The cointegration (Johansen) test indicates that there was a nexus linking inflation and all the regressors adopted in the long term. The result of the VECM for the two estimated models shows a self-equilibrating mechanism of 14 per cent and 32 per cent for the first and second models respectively. The findings further reveal that the variables; liquidity ratio, policy rate (MPR), exchange rate, reserve requirement and treasury bills rate all had an effective impact on the inflation rate and that that effect was very significant.  Hence, the CBN’s monetary policy shocks do seem to have the expected traction on the Nigerian economy. The results make it pertinent for the CBN to utilize all the policy measures adopted in order to keep inflation within acceptable thresholds and prepare to keep inflation within the targeted range of 6-9 per cent, no matter the anticipated or unanticipated strong head winds.

Keywords: ADF, CBN, Cointegration, Monetary Policy, Unit Root, VECM

The Effect of Export Trade on Commercial Banks in Nigeria (Published)

This study examined the impact of export trade on commercial banks in Nigeria. In carrying out this study, secondary data were utilized. Data were collected from the period of 1983 – 2013, and utilized with the aid of a regression technique. The findings from the analysis revealed that: there is a positive and significant relationship between credit to private sectors and export growth in Nigeria. There is positive and significant relationship between openness of the economy and export growth in Nigeria. There is a positive and significant relationship between exchange rate and export growth in Nigeria and there is a positive and significant relationship between interest rate and export growth in Nigeria.

Keywords: (NEXIM), CBN, Ecowas, Export Trade, National Export Promotion Council ( NEPC), Nigerian export-import Bank

INTEREST FREE BANKING IN NIGERIA—THE UNFINISHED BUSINESS (Published)

This paper provokes a re-visit of the decision, by the Central Bank of Nigeria (CBN), to establish interest-Free Islamic Banking in Nigeria, against the backdrop of the country’s status as a secular State. It notes that the only difference between an Islamic Bank and a conventional Bank is that the latter charges interest, while the former does not; and that the findings of various empirical studies indicate that Nigeria has a fertile financial environment for interest free banking to thrive. However, its religious colouring, which was the subject of the raging controversy that followed its initial announcement, is a constraint to its availability to non-Muslim Nigerians. Hence, it is an unfinished business that require formulation of new guidelines, to enable formation of non interest banks for the benefit of non Muslim Nigerians.

Keywords: CBN, Christian Precepts, Interest Free Banking, Non-Muslim Nigerians

INTEREST FREE BANKING IN NIGERIA—THE UNFINISHED BUSINESS (Review Completed - Accepted)

This paper provokes a re-visit of the decision, by the Central Bank of Nigeria (CBN), to establish interest-Free Islamic Banking in Nigeria, against the backdrop of the country’s status as a secular State. It notes that the only difference between an Islamic Bank and a conventional Bank is that the latter charges interest, while the former does not; and that  the findings of various empirical studies  indicate that Nigeria has a fertile financial environment for interest free banking to thrive. However, its religious colouring, which was the subject of the raging controversy that followed its initial announcement, is a constraint to its availability to non-Muslim Nigerians. Hence, it is an unfinished business that require formulation of new guidelines, to enable formation of non interest banks for the benefit of non Muslim Nigerians.                                                                                                                                              

Keywords: CBN, Christian Precepts, Interest Free Banking, Non-Muslim Nigerians

MODELING NIGERIA’S CONSUMER PRICE INDEX USING ARIMA MODEL (Published)

This paper fit a time series model to the consumer price index (CPI) in Nigeria’s Inflation rate between 1980 and 2010 and provided five years forecast for the expected CPI in Nigeria. The Box-Jenkins Autoregressive Integrated Moving Average (ARIMA) models was estimated and the best fitting ARIMA model was used to obtain the post-sample forecasts. It was discovered that the best fitted model is ARIMA (1, 2, 1), Normalized Bayesian Information Criteria (BIC) was 3.788, stationary R2 = 0.767 and Maximum likelihood estimate of 45.911. The model was further validated by Ljung-Box test (Q = 19.105 and p>.01) with no significant autocorrelation between residuals at different lag times. Finally, the five years forecast was made, which showed an average increment of about 2.4% between 2011 and 2015 with the highest CPI being estimated as 279.90 in the 4th quarter of the year 2015.

Keywords: ACF, ARIMA, Box and Jenkins, CBN, CPI, PACF

Informality and Domestic Savings in Nigeria: Lessons from Time Series Analysis (Published)

Following the dearth of empirical evidence on the response of domestic savings to informality in Nigeria, this study examined the impact of informality on domestic savings in Nigeria for the period 1970 to 2011 as a means of providing evidence based policies that will enhance the growth and development of the Nigerian economy. The study employed time series analysis using the OLS estimation procedure. The estimation results of the long run model indicate that informality hinders the growth of domestic savings, while the degree of financial depth impacts significantly and positively on domestic savings in Nigeria. It was also found that the growth rate of real per capita income impacts positively on domestic savings, even though it is not statistically significant in the long run. Based on these findings, we recommended that policy makers and the government should seek to improve the linkage between the formal and informal sectors in Nigeria as this would have a strong positive impact on domestic savings. Deposit money banks and the monetary authority should evolve policies aimed at reaching the unbanked informal sector agents, especially the rural households and the urban informal production units in order to deepen the financial sector and assist in mobilizing the much needed savings that will engender investment and growth in Nigeria. Also, development policy in Nigeria should focus on increasing the productive base of the economy in order to promote real income per capita growth and reduce unemployment.

Keywords: CBN, Domestic Savings, Informality, Nigeria, Time Series

A Panel Data Analysis of the Impact of Informality on the Liquidity of Deposit Money Banks in Nigeria (Published)

One of the major components of the overall Nigerian economy is the informal sector. Transactions in this sector are conducted mainly in cash to avoid official detection, and this is capable of starving the banking system of the deposits needed to improve its liquidity. This is the first study that empirically examined the impact of informality on the liquidity of the banking system in Nigeria. The results indicate that informality impacts negatively on the liquidity of deposit money banks in Nigeria. Specifically, we found that a unit increase in the size of the informal sector results in 7.44% deterioration in the liquidity of deposit money banks. Based on these findings, the study recommends that deposit money banks in Nigeria should pursue policies and products that will assist them to capture the huge economic activities taking place in the informal sector, while the government (through the Central Bank of Nigeria, CBN) should also reconsider its policies that are capable of driving economic units underground. The study concludes that deposit money banks in Nigeria must work together with the CBN to achieve an all inclusive banking system, thereby reducing the negative impact of informality on the liquidity of deposit money banks in Nigeria.

Keywords: Bank Liquidity, CBN, Informality, Nigeria, Panel Analysis