Bank Governance, Asset Quality, and Risk. Do Macro-Prudential Policy and Macroeconomic Factors Matter? Evidence from Nigeria’s Banking Sector

Purpose: This study examines the nexus between bank governance, asset quality, and banking risk measured by the distance to default (DTD) and their interactions with prudential policy and macroeconomic factors.   Theoretical framework: This study uses the Resource Based View (RBV) lens to examine how banks use their unique resources, asset, competencies, and governance framework to mitigate the adverse impact of risks and navigate regulatory policies and macroeconomic variables. The RBV provides context on banks’ unique resources to optimise their long-term objectives in a complex economic landscape.   Design/Methodology/Approach: The study analyses panel data from 12 listed banks on the Nigeria Stock Exchanges (NGX) from 2008 to 2021. This study tests autocorrelation, heteroskedasticity, and cross-sectional dependence to validate the study’s analysis. Based on various diagnostic tests, the Feasible Generalised Least Squares (FGLS) are suitable for hypothesis testing.   Findings: The findings revealed that bank governance interaction with asset quality has a negative and insignificant impact on bank risk. And liquidity, interest rate, inflation and gross domestic product are significant determinants of banking risk.   Research, practical & social implications: Maintaining effective bank risk management requires adherence by all stakeholders to macro-prudential policies by monetary policymakers and macroeconomic factors from the fiscal policymakers.   Originality/Value: This study empirically examines bank governance, asset quality, and banking risk in a developing country, incorporates macro-prudential policies and macroeconomic factors, and uses the DTD metric for risk assessment rarely used in related studies in developing countries

Institutions, Infrastructure and Economic Growth in Nigeria.

The study examines the impact of institutions and infrastructures on economic growth in Nigeria. The study contributes to the infrastructure-growth nexus literature in Nigeria by accounting for institutions into the model. The justification for the inclusion of the variable is based on the fact that good institutions will induce growth and that it will serve as an impetus for investor to invest in Nigeria. The result shows that there is long-run cointegrating relationship using the bounds-testing approach of Pesaran et al (2001). The study shows that population and institutions contributes positively to growth and that public infrastructure has a negative significant impact on growth. It is strongly recommended that that government should monitor her public infrastructure spending by reducing wastages so that it can contribute positively to growth. In addition, government should adhere to good institutions so as to increase the inflow of foreign direct investment into Nigeria

The role of structural breaks, nonlinearity and asymmetric adjustments in African bilateral real exchange rates

This paper examines the validity of the purchasing power parity, PPP for six African countries of Botswana, Ghana, Kenya, Nigeria, South Africa and Tanzania using the countries' bilateral real exchange rates with their fifteen major trading partners for the period 1960–2011. It uses the Lagrangian multiplier, LM, which accommodates up to two endogenous structural breaks in addition to conventional unit root tests. The paper also uses the threshold cointegration tests to explore nonlinearity and asymmetric adjustments of the series. Results from the LM unit root tests indicate that the exchange rates of Botswana, Ghana, Kenya and Nigeria relative to their major trading partners are stationary. The results from the threshold cointegration suggest that there is a long-run relationship between the series and that the adjustments are asymmetric. Appreciation is faster than depreciation in most of the countries. This is consistent with suggestions that countries are intolerant of depreciation

Structural breaks and twin deficits hypothesis in African countries

The study examines the twin deficits hypothesis in a sample of twelve African countries for the period between 1980 and 2009. These countries have experienced both the current account and the fiscal deficits, among others, that prompted an introduction of structural reforms. The paper explores long-run relationship between the series and their short-run dynamics within the context of endogenously determined structural breaks. The identified dates are generally associated with external factors that include commodity price boom and burst cycles that the countries heavily depend on. The estimated results for eight of the countries indicate that there is a positive relationship between the current account and fiscal deficits and therefore, support the twin deficits hypothesis. Results for the remaining four countries of Ethiopia, Kenya, South Africa and Uganda, on the other hand, show that the relationship between the two is negative

Macroeconomic Effects of Fiscal Policy Changes in Nigeria

The study examines the relationship between fiscal policy and macroeconomic performance in Nigeria in the post economic crisis era. The vector autoregressive, granger causality and impulse response function estimators are employed to capture the interactions between fiscal policy and macroeconomic variables. The findings indicate that the previous values of government revenue employed in financing government expenditure have impact on macroeconomic factors except for per capita income growth. However, only money supply to the size of the Nigerian economy reported a direct relationship with total expenditure growth, where others report an indirect relation. Also, the fiscal balance growth only enhances lending rate, total trade to economic size and exchange rate, and the other two variables report otherwise. The paper submitted that fiscal policy is important to achieve better macroeconomic performance in Nigeria

Threshold cointegration and the short-run dynamics of twin deficit hypothesis in African countries

This paper examines the relationship between the fiscal deficit and the current account deficit using the threshold cointegration approach of Hansen and Seo (2002). Using quarterly data for nine African countries for the period 1980-2009, a long-run positive cointegrating relationship is established for six out of the nine countries examined, while the relationship is negative for the other three. This provides qualified support for the twin convergence hypothesis. Threshold error correction effects show some diversity in the speed of adjustment of the current account relative to the speed of adjustment of the fiscal deficit. This may be a reflection of differences in the way fiscal policy issues are handled across the countries

Output Uncertainty, Monetary Uncertainty and the Nigerian Demand for Money

The study examines the stability of money demand in Nigeria for the period 1960-2015 by including two GARCH-based measures of output uncertainty and monetary uncertainty. These two measures of uncertainty were included in the money demand function for Nigeria because they could affect public’s holding of money. Prior studies: Previous only examined the stability of money in Nigeria without examining the possiblity of uncertainties in monetary and output aggregates, a gap which this study fills. Approach: The study used the nonlinear autoregressive distributed lag (NARDL) to examine the short and long-run relationship. Results: It was discovered that only monetary volatility exert significant impact on the demand for money in Nigeria both in the short run and in the long run. However, output volatility is not significant both in short-run and the long run. In addition, including the two uncertainty measures yield a stable demand for money in Nigeria. Implication: Monetary uncertainty has strong substitution effects as compared to precautionary effects and that Nigerians substitute cash by shifting to alternative assets. Value: The study contributed to the literature by examining the non-linearity and uncertainties in the stability for demand for money in Nigeria

Revisiting the twin deficits hypothesis: new evidence from nonlinear tests

This article investigates linear and nonlinear causal linkages between fiscal deficits and current account deficits in a sample of 12 African countries using quarterly data for the period 1980:1–2018:4. The results indicate evidence of unidirectional causality from current account deficits to the fiscal deficits in four countries while a unidirectional causality from fiscal deficit to current account deficit is found in five countries. Results from panel causality test revealed evidence of bidirectional causality between the two deficits. These conclusions suggest that policy to tackle one of the deficits should also take the other into consideration.</div