Interest Rate Pass-Through to Macroeconomic Variables: The Nigerian Experience

The effectiveness of monetary policy depends on the adjustment response of Central Banks short-term interest rate on the real interest rates charged by commercial banks and ultimately on macroeconomic indicators of investment and consumption in the economy. Thus, the extent of interest rate pass-through largely depends on how effective the process of financial intermediation works and to what extent individual bank characteristics influence or hinder a perfect adjustment of product rates based on market conditions. The study examines the speed and completeness of pass-through from policy rates to retail bank rates and the effectiveness of monetary policy stance in influencing macroeconomic policy targets using a co-integration analysis based on Johansen and Juselius maximum likelihood and Engle-Granger two step procedures for the period 1970–2011. The VAR based Error Correction Model (ECM) and the Mean Adjustment Lag (MAL) was used to determine the short run estimates and asymmetric behaviour respectively. The study found an evidence of downward stickiness both in the short-run and long-run policy pass-through to the retail bank rates. In order to ensure robustness of the result, the Impulse Response Function (IRF) and Variance Decomposition (VD) analysis were conducted and similar slow and sluggish pass-through was obtained. The study as well, found pass-through from policy rate to macroeconomic variables to exhibit extremely rigid immediate responses

Global Financial and Macroeconomic Fluctuations: Implications for African Economic Development

In the light of dampening effects of the global financial melt-down, the paper examines the trends in financial flows, particularly foreign direct investment (FDI) and the possible effects of the global financial crisis and macroeconomic fluctuations on economic development in Africa. The paper employs simple panel data approach which links panel data methodology that allows for individual heterogeneity, while the method of estimation is the Fixed and Random Effects regression. The method of panel VAR is also used in the paper with a view to capturing the dynamic effects of FDI inflows for policy analysis using the impulse response functions. The number of countries (27) included in the paper and the period of estimation, 1987-2007, are informed by data availability. With some suggestions on the direction of policy to stimulate increased financial flows, the paper opines that there is the need for comparative dynamics of African economies in order to return to the path of sustainable growth and development

Rethinking Regional Energy Policy Do Threats Matter in Supply and Generation Process?

The study investigates potential threats to energy security and sustainable electricity production from a regional perspective, after identifying a host of factors that are likely to affect sustainable energy production and supply using seemingly unrelated regression estimation, which produces efficient estimates. Our results show that energy security which we described as the level of diversification in regional specific energy generating sources is probably being affected by regional specific level of industrialization and domestic energy consumption. Issues of over dependence on specific sources of energy supply (particularly nuclear production sources) were also found to have a negative effect on energy security and probably increase the risk of future failure in energy supply. Energy policy was also found to have a significant effect on energy security. The impacts of various constraints on electricity production were also considered. It was found that many factors affect electricity output production in regions particularly environmental factors that affect consumption and generation

FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH IN ECOWAS: A SYSTEM-GMM APPROACH

The paper investigates the relationship between foreign direct investment and economic growth in ECOWAS using the System-GMM panel estimation technique covering the period 1970-2011.The study adopted System-GMM in order to overcome the weaknesses perceived in the empirical works of earlier studies; majority of these studies failed to control for the presumed challenges of endogeneity inherent in the FDI-Growth argument. The study likewise interacted human capital and institutions indicators with other explanatory variables in explaining the variability of FDI. The results of the System-GMM appears contrary to earlier studies, as the contribution of FDI was insignificant and impacts negatively on growth in ECOWAS despite the controlling for the role of human capital and quality of institutions in the model. Following this outcome, policy makers in developing Africa needs to exercise cautions in adopting the recommendation from earlier studies; most of which advocates more openness, human capital development and the strengthening of institutions. This might not be completely helpful considering the pattern of FDI inflow into ECOWAS, which is absolutely resourceseeking. There is need to curtail excessive openness in the extractive industries, encouraging more manufacturing FDI and domestic investment of repatriated capital by ensuring more economic stability and raising domestic interest rate

Environmental quality and economic growth in Nigeria: A fractional cointegration analysis

The paper investigates the relationship between environmental quality and economic growth in Nigeria using a fractional cointegration analysis over the period 1970-2011. It seeks to examine the effect of growth on environmental performance by controlling for the role of institutional quality, trade openness and population density. The paper found that early stages of development in Nigeria accentuate the level of environmental degradation. It also finds that weak institutions and unrestricted trade openness increase the extent of environmental degradation due to environmental dumping. Finally, the paper shows that a larger population density enhances the promptness of environmental abatement measures and consciousness for cleaner environment. The study, however, failed to attain a reasonable turning point and hence a non-existence of EKC in Nigeria. The paper recommends the need to restrict the importation of emission intensive products, check the activities of multi-nationals which invest in producing high CO2 emitting goods in LDCs and exports to home countries. Finally, there is need to strengthen institutional quality to ensure adoption of clean technologies as income rises

The Role of Services Trade in Economic Development

This paper is an attempt to investigate the impact of services trade on economic development of Sub-Sahara African (SSA) countries. Our analysis is based on a panel data framework over the period 1990 to 2010 covering thirty-three countries. The paper employs the endogenous growth model to examine the nonlinearities associated with services exports and services imports in the economic development process of SSA countries under consideration. The trade data was disaggregated into travel, transport and other services. The panel data constructed was estimated using ordinary pooled, fixed effects and random effects model techniques and the efficient model was selected based on the Hausman test. The paper finds that both services exports and services imports enhance economic development process. The study also indicates that labour and capital play an important role in the SSA economies

FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH IN ECOWAS: A SYSTEM-GMM APPROACH

The paper investigates the relationship between foreign direct investment and economic growth in ECOWAS using the System-GMM panel estimation technique covering the period 1970-2011.The study adopted System-GMM in order to overcome the weaknesses perceived in the empirical works of earlier studies; majority of these studies failed to control for the presumed challenges of endogeneity inherent in the FDI -Growth argument. The study likewise interacted human capital and institutions indicators with other explanatory variables in explaining the variability of FDI. The results of the System-GMM appears contrary to earlier studies, as the contribution of FDI was insignificant and impacts negatively on growth in ECOWAS despite the controlling for the role of human capital and quality of institutions in the model. Following this outcome, policy makers in developing Africa needs to exercise cautions in adopting the recommendation from earlier studies; most of which advocates more openness, human capital development and the strengthening of institutions. This might not be completely helpful considering the pattern of FDI inflow into ECOWAS, which is absolutely resourceseeking. There is need to curtail excessive openness in the extractive industries, encouraging more manufacturing FDI and domestic investment of repatriated capital by ensuring more economic stability and raising domestic interest rate

Income Heterogeneity and Environmental Kuznets Curve in Africa

The Environmental Kuznets Curve (EKC) hypothesis asserts that pollution levels rises as a country develops, but reaches a certain threshold where pollution begins to fall with increasing income. In EKC analysis, the relationship between environmental degradation and income is usually expressed as a quadratic function with turning point occurring at a maximum pollution level. This study seeks to examine the pattern and nature of EKC in Africa and major income groups according to World Bank classification comprising low income, lower middle income and upper middle income in Africa. In ensuring the robustness of our study; the paper proceeded by ascertaining the nature of EKC in all fifty-three countries of Africa in order to confirm the results obtained from basic and augmented EKC model. The study could not validate EKC hypothesis in Africa (combined), low income and upper middle income but empirical and analytical evidences supports the existence of EKC in lower middle income countries. Likewise, evidences from the robustness checks confirmed the findings from the basic and augmented EKC model. The study could not attain a reasonable turning point as there are evidences that Africa could be turning on the EKC at lower levels of income. Also, there is need to strengthen institutions in order to enforce policies that prohibits environmental pollution and ensure pro-poor development agenda

Pollutant Emissions, Energy Consumption and Economic Growth in Nigeria

The study investigates the direction of causal relationships among emissions, energy consumption and economic growth in Nigeria using annual time series data for the period 1970-2013. The Johansen maximum likelihood cointegration tests indicate an existence of a unique cointegrating vector, and the normalized long run estimates shows that fossil fuel enhances carbon emissions whereas, clean energy source (electricity) mitigate the atmospheric concentration of carbon dioxide (CO2) emissions. Similarly, the Wald exogeneity Granger causality test indicates an existence of unidirectional causation running from fossil fuel to CO2 emissions and gross domestic product (GDP) per capita. Alternatively, non-fossil energy (electric power) causes more proportionate change in GDP per capita but our result could not establish any causal link between electric power and carbon emissions. Finally, charting a channel towards ensuring sustainable environment and economic development involves a progressive substitutability of clean energy sources for fossil consumption

Energy Supply and Climate Change in Nigeria

The energy industry has been identified as one of the sectors most vulnerable to the impact of climate change. In the past years, government had been making a lot of effort at reforming the energy sector and this study attempted to investigate the extent to which the energy sector will be affected in the face of the threats presented by a changing climate. The study seeks to examine the impact of climate change on energy supply in Nigeria for the period 1971-2011 using the vector error correction procedure. We adopted the Johansen and Juselius, and Engle-Granger co-integration analysis to determine the rank of the series long run co-integration. Also the error correction model was used to obtain the long-run estimates and the speed of error adjustment. We corroborate our findings by adopting the Wald exogeneity test to examine the direction of causal relationship between climate change and energy production. The study found a positive relationship between climate change and energy supply, as well as no evidence of causal relationship between climate change and energy supply. The study developed an interaction of climate change and measure of institutional quality, though less responsive to energy supply, but exhibits similar pattern with the actual climate change. Also, the indicators of power losses, technology and investment impacts a significant negative influence on energy supply, while GDP per capita and economy structure exerts though positive but the indicator of economic structure was statistically insignificant in explaining dynamism in energy supply. The findings from our empirical investigation puts caution on economic advisers and policy makers on the level of adherence to the Kyoto protocol in order not to jeopardize productivity activities and economic gains. Also,adaptation efforts should however follow careful scenario analysis with a strengthened institutional framework and injection of funds for technological improvement. This could be done in partnership with international organizations and the private secto