Development Finance Institutions in Nigeria: Structure, Roles and Assessment

The efficient channelling of funds and allocation of financial resources are roles expected to be undertaken in the financial system to facilitate productive growth in the real sector of the economy. There have been overlapping roles in the Nigerian financial system and this has resulted to inefficient intermediation and under-development of vibrant sectors of the economy. Thus, necessitated the emergence of development financial institutions to render services to the large un-catered economics agents (especially in the rural areas) by the universal banks. The institutions are expected to offer specialized and micro financial services, offer relative cheap and accessible financing options, provide long-term finance for infrastructure development, industrial growth, agriculture, small and medium enterprises (SME) development and provide financial products for certain sections of the people. However, this paper evaluates the roles and structure of the development financial institutions in Nigeria and also assesses their performance over time.Development Finance Institutions, Financial Institutions, Financial Intermediation, Real Sectors, Financial Services, Financial Products, Small and Medium Scale Enterprises, Nigeria

Capital Flight and Investment Dynamics in Nigeria: A Time Series Analysis (1970-2006)

This study critically examines the implications of capital flight on investment growth in Nigeria between 1970 and 2006, because of the consequential effect it has on economic growth. The time series data properties incorporated were examined using the Augmented Dickey-Fuller (ADF) unit root test and the results revealed that Investment, capital flight, interest rate and exchange rate were stationary at levels excluding exchange rate found to be integrated at first difference. The Augmented Engle-Granger (AEG) co-integration test employed to investigate the dynamic relationship between capital flight and investment level in Nigeria, revealed that there exist long-run interaction. Though, capital flight was found to exert positive but insignificant effect on investment growth during the review period. While, the short-run dynamic interaction as a result of the structural instability in the long-run was captured by the Error Correction Mechanism (ECM) model which was found inestimable due to the high collinearity existing among the incorporated variables. Policy recommendations were proffered base on the research findings.Capital flight, Investment behaviour, Long-run, Stationarity, ECM, Cointegration, Nigeria

Monetary Policy and Share Pricing Business in Nigeria

The anatomy of Nigerian financial system is composed of the money and capital markets. Monetary policy is a framework used by the apex bank to regulate the flow of loanable funds in the economy, though the pricing of equity used by private investors to raise capital from the economy is carried out at the capital market end of the system. As earlier empirical studies have shown the relationship between monetary policy and stock market, this study provide a precise insight in the mechanism of interaction that co-exist between monetary policy and share pricing in Nigeria. The study identified money supply and interest rate (credit creation) as the main channels through which monetary policy influence sharing pricing in an open economy like Nigeria.Monetary Policy, Share Pricing, Monetary instruments, Money supply, Equity/capital market, money market, financial system, IPO pricing, Nigeria

Is Monetary Policy a Growth Stimulant in Nigeria? A Vector Autoregressive Approach

This paper critically examines the dynamic interaction between monetary policy tools in stimulating economic growth, as well as stabilizing the economy from external shocks in Nigeria. The paper considered key monetary time series variables and real growth of output in formulating Vector Autoregressive (VAR) models which showed interdependence interaction between the period of 1970 and 2007. The time series properties of the selected variables are examined using the Augmented Dickey-Fuller unit root test and the results revealed that only growth of real output and broad money supply are stationary at levels, while saving, lending and exchange rates were found stationary at first difference. The long-run dynamic interaction was established through the Johansen’s Trace and Maximum Eigenvalue tests. The pair-wise Granger-Causality test conducted showed that the growth rate of real output is not a leading indicator for any monetary variables. Other innovation accounting tests were also carried out like impulse responses function to test for the response of growth in real output to innovation shock on monetary variables. Also, the forecast error variance decomposition (FEVD) is used to decompose the monetary shock on the growth rate of real output in Nigeria. Proper policy recommendations were proffered based on the results emanated from the econometric analyses.Monetary policy, Monetary Instruments, Economic growth, VAR, Impulse shock response, Variance decomposition

Infrastructural Financing in Nigeria: Growth Implications

This study critically analyzes the effects of infrastructural financing on economic growth in Nigeria between 1970 and 2010. The time frame is selected based on data availability and to cover major structural economic eras in Nigeria since a decade after independence.  The empirical model employed for this study is adopted from the work of Cullison (1993) and later modified. The econometric model incorporates components of government infrastructural spending based on functions. The ordinary least square (OLS) method is used to estimate the empirical model. The result of analysis revealed that that government community service infrastructure spending, private infrastructure investment, broad money supply, and total population, exert positive influence on economic growth. While, government economic service infrastructural spending and total domestic and external debt exerts negative effects on economic growth in Nigeria. On the basis of the significant F-statistic result the null hypothesis “infrastructural investment has significant effect on economic growth in Nigeria”. Policy recommendations are proffered based on the empirical findings. Keywords: Infrastructure Financing, Public Investment, Public Private Partnership (PPP), Economic Growth, Nigeri

Dynamics of Monetary Policy and Output Nexus in Nigeria

This paper critically examines the dynamic interaction between monetary policy tools in stimulating economic growth, as well as stabilizing the economy from external shocks in Nigeria. The paper considered key monetary time series variables and real growth of output in formulating Vector Autoregressive (VAR) models which showed interdependence interaction between the period of 1970 and 2007. The time series properties of the selected variables are examined using the Augmented Dickey-Fuller unit root test and the results revealed that only growth of real output and broad money supply are stationary at levels, while saving, lending and exchange rates were found stationary at first difference. The long-run dynamic interaction was established through the Johansen’s Trace and Maximum Eigenvalue tests. The pair-wise Granger-Causality test conducted showed that the growth rate of real output is not a leading indicator for any monetary variables. Other innovation accounting tests were also carried out like impulse responses function to test for the response of growth in real output to innovation shock on monetary variables. Also, the forecast error variance decomposition (FEVD) is used to decompose the monetary shock on the growth rate of real output in Nigeria. Proper policy recommendations were proffered based on the results emanated from the econometric analyses. Keywords: Monetary policy, Monetary Instruments, Economic growth, VAR, Impulse shock response, Variance decompositio

Development Finance Institutions in Nigeria: Structure, Roles and Assessment

The efficient channelling of funds and allocation of financial resources are roles expected to be undertaken in the financial system to facilitate productive growth in the real sector of the economy. There have been overlapping roles in the Nigerian financial system and this has resulted to inefficient intermediation and under-development of vibrant sectors of the economy. Thus, necessitated the emergence of development financial institutions to render services to the large un-catered economics agents (especially in the rural areas) by the universal banks. The institutions are expected to offer specialized and micro financial services, offer relative cheap and accessible financing options, provide long-term finance for infrastructure development, industrial growth, agriculture, small and medium enterprises (SME) development and provide financial products for certain sections of the people. However, this paper evaluates the roles and structure of the development financial institutions in Nigeria and also assesses their performance over time. Keywords: Development Finance Institutions, Financial Institutions, Financial Intermediation, Real Sectors, Financial Services, Financial Products, Small and Medium Scale Enterprises, Nigeri

Fiscal Policy and Term Structure of Interest Rate in Nigeria

The study examines the effects of fiscal policy on term structure of interest rate in Nigeriabetween 1981 and 2014. The paper built on the fact that continuous increase in fiscal deficit in Nigeria has not translated into equal change in term structure of interest rate as proposed by the economic theory. Using secondary annual time series data which are obtained from Central Bank statistical bulletin, 2014, the paper employed appropriate econometric techniques such unit-root test, Johansen Co-integration technique, Error Correction Mechanism and Fully Modified Ordinary Least Squares. The paper shows that fiscal deficit has a positive and significant effect on term structure of interest rate in Nigeria and concludes that consumers are not forward-looking in Nigeria as proposed by Ricardian Equivalence Hypothesis theory. Consumers in Nigeria increase their consumptions has government employed expansionary fiscal policy which may reduce the savings and investment. Consequently, reduces growth. Thus, the implication is that fiscal deficit could responsible for the uncertainties and inconsistencies in the term structure of interest rates in Nigeria

Determinants of Financial Savings in Nigeria: An Empirical Analysis of Monetary Policy Stability

This paper critically investigate the key determinants of financials and implications of monetary policy instruments on its variability in Nigeria between 1980 and 2008 dynamic long-run econometric model. The empirical results from the Engle Granger Cointegration test show a negative influence of GDP growth per capital income (PCY), board money supply (M2), and debt service ratio (DSR) and positive influence of real interest rate (RIR), interest rate spread (SLS) and domestic inflation rate in the long-run. The Augmented Dickey Fuller (ADF) unit root test result also revealed that most of the time series incorporated in this study are not stationary at level. The paper therefore submits that effort should be geared towards improving per capita income by reducing the unemployment rate in the country in a bid to accelerate growth through savings. There should also be an intensified effort to stabilize debt service ratio at moderate levels so as to ameliorate its negative impact on financial savings level in Nigeria. Keywords: Financial Savings, Determinants, Monetary Policy Stability, Long-run and Unit root