A Statistical Investigation of Variables on Government Economic Policy Choices, Business Environments and Prices (Published)
Does government economic policy choices have effects on businesses and/or prices? Do they relate in some way? This is the issue the paper seeks to address. We collected data on government economic policy choices, businesses environments and prices from countries in Africa, Asia, America and Europe. The data were subjected to statistical investigation by calculating six correlation coefficients for each continent, ascertaining which variables are correlated, and getting the levels of correlations. The results empirically show that in three continents, government economic policy choices do have effects on the business environment. The continents are Africa (correlation between Govt. Debt to GDP growth and Corruption Index is 0.504488), Asia (0.488973), and America (0.515489). They are all in the same range. The correlation coefficient for Europe is very low (0.016655).
This study examined the relationship between exchange rate and economic growth in Nigeria between 1981 and 2020. The specific objectives are to determine the effects of exchange rate, inflation and interest rate on gross domestic product (GDP). The data on the variables were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin and World Development Indicators, and analyzed using descriptive statistics, unit root as well as bounds cointegration tests and ARDL model. The unit root test results showed that the variables are mixed integrated. While inflation is stationary at levels, the other variables in the model were stationary at first difference. The bounds cointegration test showed that long run relationship exists between GDP growth and the underlying explanatory variables. The findings showed that exchange rate and inflation negatively impacted on economic growth. This finding indicates that increase in exchange rate and price level is detrimental to the growth of the Nigerian economy. There is evidence of a significant positive effect of interest rate on GDP growth. This finding explains the reality in Nigeria, where businesses and households tend to borrow even as interest rate increases, but tend to cut corners by reducing the quality of their products and services or pass-on the increased costs of borrowing to consumers by increasing prices. Given the findings, this study recommends amongst others that the federal government through the CBN should ensure that exchange rate policy should is consistent to provide opportunity for a realistic and stable exchange rate capable of driving economic growth in Nigeria.
Modelling the Volatilities of Nigeria Exchange Rate, Inflation Rate, and the Stock Exchange using Time Series Models (Published)
This research modelled the volatilities of Exchange rate, Inflation rate and Nigeria stock exchange. The research fit time series models; Autoregressive Conditional Heteroskedastic (ARCH) model, Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model, and Exponential GARCH (EGARCH) model, using the monthly data on Exchange rate, Inflation rate, and Stock exchange from January 1990 to December 2017. The return series of the variables shows periods of low and high volatilities, which signify volatility clustering. The parameters of the three variables were estimated and compared using each of univariate GARCH (1, 1) model under consideration i.e. GARCH (1, 1), EGARCH (1, 1) and GJR-GARCH (1, 1) models. Furthermore, the three variables were compared using the GARCH (1, 1) model and it was discovered that Nigeria stock exchange have the best performance, followed by inflation rate and exchange rate in that order. based on the assumption of 5% level of significant for GARCH (1, 1) model, most of the parameters of the Stock exchange are significant with a p-value less than 0.05, for Exchange rate only the constant (Cst1) and a_1 parameters is significant, for Inflation both Alpha1 and Beta1 are significant. EGARCH (1, 1) indicate that Nigeria stock exchange just as GARCH (1, 1) have the best performance, followed by inflation rate and exchange rate in that order. Only Exchange Rate has leverage volatility effect out of the three variables based on the result from EGARCH model.
Citation: Nasiru M.O., Ajayi A.A., Mustapha A.K (2021) Modelling the Volatilities of Nigeria Exchange Rate, Inflation Rate, and the Stock Exchange using Time Series Models, International Journal of Mathematics and Statistics StudiesVol.9, No.4, pp.1-13
An Empirical Analysis of National Debt, Debt Servicing and the Growth of the Nigerian Economy (Published)
Nigeria’s national debt and debt servicing expenditure has been on the increase since from 1981 till date, this has prompted the researchers to study the impact and economic implications of this rise in debt and debt servicing profile on the growth of the Nigerian economy. The study adopted annual debt stock, debt service expenditure and the control variables of exchange rate and inflation rate as the independent parameters which were regression against gross domestic product as proxy for the growth of the Nigerian economy and response variable. Secondary data were collected from Central Bank of Nigeria Statistical Bulletin and the Debt Management Office for the ranging from 1981 to 2019. The study employed multiple regression techniques assisted by the E-views computer software for the analysis of data. The results revealed that annual national debt and exchange rate had significant impact on the growth of the Nigerian economy with a P-value of 0.0180 and 0.0070 respectively which were less than the 0.05 level of significance. Debt servicing and inflation rate had no significant impact on economic growth in Nigeria with a P-value of 0.1054 and 0.5011 respectively. In the overall, the results of the model indicated that debt and debt servicing had statistically significant effect on economic growth with overall probability of F-statistics value of 0.050683 which less than the 0.05 significance level. Based on the findings the study recommended that the monetary authorities should put in place appropriate steps to properly manage the Nation’s debt stock and the cost of servicing debt; and that the country’s borrowings should be invested on viable capital projects as well as human capital that will yield economic returns.
The paper studied oil revenue and behavior of selected macroeconomic indicators in Nigeria from 1981-2019. The main purpose were interest rate, inflation rate and exchange rate within the time frame. The paper was anchored on the Endogenous growth theory. The study adopted ex-post facto research method while Ordinary Least Square was used to process the data gathered using E-view software. The findings indicates that apart from interest rate, no significance relationship exist between the two other variables study with oil revenue. While the study concludes that inflation rate and exchange rate can be stabilized through effective monetary policy measure. The study therefore recommends diversification and encouragement of more participation of nongovernmental sector in economy development.
To ensure full employment of human resources has been a major problem in Nigeria over the years. This research investigated the influence of corruption on employment level in Nigeria from 1994 to 2019. Corruption is used as explanatory variable; employment rate is used as explained variable and inflation rate is explored as a control variable. The study engaged regression method for the analysis. The outcome from the inquiry revealed that the combine influence of both corruption and inflation rate have a long run equilibrium connection with the level of employment. Corruption has significant inverse influence on the level of employment. Inflation rate taken in isolation has significant negative influence on the level of employment. Employment rate and corruption are negatively correlated and it is a strong correlation. Employment rate and inflation rate are negatively correlated but a weak correlation. Based on the findings, the investigation concludes that corruption has a significant inverse influence on employment rate in Nigeria. The implication is that, increase in corruption will lead to a decline in employment rate. It is thus recommended that Government should establish more institutions to monitor the activities of EFCC and ICPC since in recent times officials in those institutions are found in corrupt practices.
The paper examined the effect of currency devaluation on the Non-oil export of Nigeria. The study covered the period of 1986 to 2018. Secondary data were sourced from Central Bank of Nigeria Statistical Bulletin of various issues. Independent variables include: Inflation Rate (INFR), Exchange Rate (EXR), and Money Supply (MS) while Non-Oil Export (NOE) represented the dependent indicator. Ordinary Least Square Regression Model was used to analyze the short run relationship between variables used for the study. The variables were also subjected to Augmented Dickey Fuller and Philip Perron Unit Root test, Johansen Co-integration and Granger Causality Tests was adopted to analyze the effect of currency devaluation on non-oil export in Nigeria. The result showed that EXR had a negative significant effect while MS had positive significant influence on non-oil export but INFR had negative but insignificant relationship on the dependent variable in Nigeria hence devaluation of currency influenced non-oil export in Nigeria negatively. The Nigerian Government needs to increase its competitive chances by either revaluating its currency or banning importation of some items produced locally to boost the domestic economy. The study provides the extent at which the devaluation of currency influences the non-oil export in Nigeria.
Currency devaluation on the Exportation Revenue: A study of Nigeria, South Africa and China (2000-2017) (Published)
The study examines the impact of currency devaluation on total export revenue in Nigeria, South Africa and China. Secondary data were sourced from World Bank Data Atlas for inflation rate (INFR), exchange rate (EXR), money supply (MS) and total export revenue (TER) for the period of 2000 to 2017 and were subjected to Augmented Dickey Fuller and Philip Perron Unit Root test, Johansen Co-integration and Vector Error Correction Model. The study discovers that EXR, INFR and MS were unable to impact exportation revenue in Nigeria and South Africa while showing strong impact on exportation revenue of China. The result also shows that only China enjoys long run relationship while Nigeria and South Africa currency devaluation variables showed absence of long run relationship with exportation revenue. Thus, the study concludes that currency devaluation in China impact negatively on the export position of Nigeria and South African economies. Hence, the study recommends maintenance of China’s currency devaluation position while Nigeria and South Africa should re-evaluate and re-adjust their currency devaluation procedures to improve exportation revenue.
The near free fall of the naira in the parallel-market as a result of persistent fall in the international price of crude-oil is indicative of a monolithic economy. Oil export had accounted for an average of 97 percent total export since 1981 to 2013, hence in the current face of dwindling foreign exchange earnings tremendous pressure is been exacted on the naira. This study seeks to examine this phenomenon of inflation in Nigeria in terms of structural rigidities that have limited agricultural output and of course diversification of the Nigerian economy. Based on theoretical underpinnings two explanatory variables were specified in the model of the study, where the study sought to establish relationship between the explanatory variables and manufacturing capacity utilization (MCU) in Nigeria.
Empirical Analysis of Effects of Inflation on Aggregate Stock Prices in Nigeria: 1980-2012 (Published)
This paper investigates empirically the effects of inflation on aggregate stock prices in Nigeria during the period of 1980-2012. Annual time series data on Stock Prices (ASP) and inflationary pressure measure were sourced from the Central Bank of Nigeria Statistical bulletin and Nigeria Stock Exchange Fact book. Employing the Engle-Granger and Johansen-Joselius method of co-integration in a Vector Error Correction Model (VECM) setting, in addition to Granger causality Test, Argumented Dickey Fuller Test (ADF) was employed. The empirical results shows that there exist a long run equilibrium negative and significantly relationship between inflation rate and aggregate stock prices, Broad money supply (M2) has a negative and significantly effects on aggregates stock prices, Narrow Money Supply (M1) shows a positive and significantly effects on aggregates stock prices while Average inflation rate show a positive and significantly relationship between aggregate stock prices. The results also show a strong relationship with an R2 of 0.886 representing 89.6% variations in the explanatory variables. However, the direction of causality between the money supply measures and aggregate stock prices is mixed. We recommend for the strengthening of monetary policy objective of price stability for the purpose of achieving efficiency in performance of the stock prices quoted in the Nigerian Stock Exchange (NSE).
The main purpose of this study is to ascertain the existence of a relationship between inflation and economic growth in Nigeria. The methodology employed in this study is the quantitative research design. Consumer price index (CPI) was used as a proxy for inflation and the GDP as proxy for economic growth, to examine the relationship. The scope of the study spanned from 2000 to 2009. Ordinary least square method and t-test was used to test the variables most likely to impact on economic growth in Nigeria due to inflation. The findings also shows that there is strong relationship between inflation and economic growth in Nigeria, that exchange rate has positive impact on economic growth and that high interest rate discourages investment and hence forestalls economic growth. It is therefore, recommended that the monetary policies aimed at exchange rate be strengthened through effective supervision and regulatory framework of financial system by the monetary framework of financial system by the monetary authorities. Continuous monetary policies that will achieve the desired macroeconomic stability, increase in private sector credits and there is also need fro more effective management of interest rate in Nigeria
There are elements upon which a nations’ economic development are dependent. The importance of Capital Market as one of the vehicles upon which most under-developed economies could grow cannot be overemphasized. The extent to which these economies experience the said growth is quite relative to the level of awareness and management of the market. Nigeria is not left out in the desire to maximize the gains of the capital market to boost its economy. This paper empirically examines the impact of the Nigerian Capital Market on the Nigerian economy looking at a 20 years period from 1992 to 2011. The Nigerian Capital Market was proxy as Market Capitalization against some variables of the economy such as Gross Domestic Product (GDP), Foreign Direct Investment, Inflation Rates, Total New Issues, Value of Transaction and Total Listing. Using the multiple regression analysis, we find that Capital Market has an insignificant impact on the Economy within the period under review. The study therefore advised that policies and measures that would boost investors’ confidence should be enshrined in the running of Nigerian Capital Market so that it could contribute significantly to the growth of Nigerian economy noting that all elements of the market are essential ingredients to the development of a nation.
THE RISING INCIDENCE OF NON -PERFORMING LOANS AND THE NEXUS OF ECONOMIC PERFORMANCE IN NIGERIA: AN INVESTIGATION (Published)
Since the introduction of Structural Adjustment Programme (SAP) in Nigeria in the 1980’s, the financial system has witnessed excessive liberalization. Community Banks which were the main stay of the financial system have transformed to Microfinance Banks (MFB) resulting from the uncontrolled collapsed of these institutions. The Central Bank of Nigeria (CBN) very recently introduced reforms meant to curb the high incidence of bank failures in the country that required the introduction of minimum capital requirement for the establishment of commercial Banks and MFBs. After some years of experiments, it was obvious that the reforms put in place were not adequate to stem the tide of bank failures. It was as a result of this that the Apex Bank (Central Bank of Nigeria) increase the minimum capital requirement for commercial banks to N25b ($160,000). Many Banks could not meet this new capital requirement and were faced with the option of been merged with other stronger banks or allowed themselves to be completely taken over by other banks. From researches done on the performance of banks, it has been proven that banks tend to do very well when the economy is also doing very well. It is on this basis that this work has been undertaken to confirm this assertion or otherwise confirm that non- performing loans tend to increase when the economy slacks into a recession. The study found that increase in non-performing loans impacted negatively on the Gross Domestic Product in Nigeria and that increase in lending rate and inflation rate cause non-performing loans to increase. The implication of this study is that Central bank should introduce policies that can have moderating effects on inflation and lending rates.Government should pay their loans on time and insider abuse should be eliminated from the financial system. Above all, banks should know their customers before granting loans to them, infact adhering strictly to the 5C’s of credit in modern banking practice.
The study aims at evaluating the link between inflationary rate and economic growth in Nigeria. It also examines the nature and form of association between inflationary rate and exchange rate as well as interest rates from 1979 t0 2010.Ordinary least squares approach in the form of multiple regression was adopted in examining the relationship among the variables while the causalities were evaluated using Granger Causality model. It is pertinent to check whether the short run relationships would be sustained in the long run. To achieve this, Johansen and Juselius cointegration technique was adopted while the variables were adjusted for stationarity using the Augmented Dickey- Fuller (ADF) tests for unit root. It was found that inflationary rate is negatively related with real gross domestic product while exchange rates and interest rates are positively related with inflationary rate though not to a very significant extent. This is sustainable even in the long run and the implication is that when inflationary rate is rising, it affects the economy negatively as growth is dampened. On causality, at both lag 2 and lag 4, the study reveals that there is no causality between inflationary rate and real gross domestic product. However, at lag 2, there is a unidirectional causality running from inflationary rate to interest rate and also a unidirectional causality running from interest rate to real gross domestic product. At lag 4, there is a unidirectional causality running from interest rate to inflationary rate and from interest rate to exchange rate and also a unidirectional causality running from exchange rate to real gross domestic product. Consequently, efforts should be geared towards keeping inflationary rate at a single digit level to enhance the growth and development of Nigeria economy and to ensure that macroeconomic activities are kept alive
This study empirically assessed the impact of real interest rate on savings mobilization in Nigeria. The Vector- Auto Regression (VAR) was employed, using the time series data from 1980 to 2008. The study revealed that real interest rate has negatively impacted on the level of savings mobilization in Nigeria. The need for government in Nigeria to bridge the existing gap between the lending and savings rates and increase per capita income level of the populace, to stimulate savings for investment and economic growth were revealed by the study. Therefore, efforts should be geared towards reducing domestic inflation rate to arrest its negative impact on real rates in Nigeria.