Financing Role in Structural Transformation in Nigeria

This study adopts a comparative approach to examine the role of financing on structural transformation in Nigeria. The Autoregressive Distributed Lag (ARDL) analysis was carried out and we found out a long run relationship between financing and agricultural output as well as between financing and industrial output. However, bank financing is more concentrated on the industrial sector than the agricultural sector. There is increased output in the industrial sector due to increase in money supply while the funds from the Agricultural Credit Guarantee Scheme to the agricultural sector has promoted increase in the agricultural sector’s output. The study recommends that while policies should be geared towards enabling further development of the industrial sector, it is also vital to consciously drive the agricultural sector to increase production. The agricultural sector, if well-funded, has the capacity to bloom and form a strong linkage with the industrial sector

Understanding the Theory of Consumption in the Context of a Developing Economy

This paper synthesizes the theory of consumption using some Nigerian contexts. The argument on what determines consumption is yet an unfinished task. We tested the general consumption function using Nigerian data covering 1981-2012. Based on the diagnostics, we employed a vector autoregression-in-first difference approach. The result shows that previous incomes (up to two lags) may not be significant in influencing consumption in Nigeria but previous consumption levels (up to two lags) attained may do. In addition, consumers in Nigeria may reduce their consumption in the current year based on their knowledge of previous year consumption but may raise the current consumption level  due to their experience of last    two years consumption. This corroborates suggestions that macro-econometricians must analyze consumption beyond the general consumption function. The pattern of historical data also suggests that consumption may be difficult to predict in Nigeria. Therefore, government of Nigeria may succeed in influencing its aggregate demand which consumption is the major component if its income and tax policies are permanent, rather than being temporary

Re-examining Exchange Rate Regimes and Inflation Nexus: An ARDL Analysis for Nigerian Case

Exchange rate has remained devastated in Nigeria while the problem of high inflation lingers. Therefore, this paper re-examines the effect of exchange rate regimes on inflation in the country. We used the Autoregressive Distributed Lag (ARDL) approach for our analysis. Contrary to most studies on Nigeria, we tested the stability of our inflation model. The past one year value of exchange rate has a negative and significant impact on the current inflation rate. Inflation rate increased more during the fixed exchange regime compared to the floating exchange rate regime. During the floating exchange rate regime, as the exchange rate increases, the inflation rate decreases and vice versa. This suggest that the floating exchange rate regime policy is preferable for combating increases in inflation rate compared to the fixed exchange rate. The lags of money supply have a direct relationship with inflation rate. The past two years value of interest rate also has a direct relationship with inflation rate. It is imperative that future studies on Nigeria consider wider spectrums of exchange rate regimes than ours

Re-Examining the Nexus between Exchange and Interest Rates in Nigeria

Nigeria has experienced somersault of foreign exchange policies by the Central Bank. One policy concern in recent times is to have an appropriate target of the exchange and interest rates. Therefore, this paper seeks to provide a foundation for the targeting of an appropriate exchange and interest rates for the country. Using the Johansen Cointegration and Vector Error Correction Mechanism approaches, it specifically examines the relationships among Nigeria’s weak exchange rate, its local rate of interest and world interest rate. Contrary to many studies, a control measure involving inclusion of inflation, money supply and national output in the model is done. The analysis showed an equilibrium association between exchange rate and interest rate-cum-other variables and steady rectification of deviance from long-run stability over a sequence of incomplete short-run modifications. Increase in domestic and world interest rate, inflation, money supply and GDPat equilibrium would strengthen the exchange rate. Besides, further findings showed some bidirectional causal associations among the variables. By long-run implication, the targeting of an appropriate exchange rate in Nigeria requires a tightened monetary policy that is not inflation and growth biased. However, increase in world interest rate, money supply and inflation rate must be moderate in order not to worsen the exchange rate as suggested by the short-run result.&nbsp

AN INTER-TEMPORAL ANALYSIS OF OPERATIONAL EFFICIENCY OF OIL FIRMS: FURTHER EVIDENCE FROM NIGERIA

There have been growing needs to investigate oil and gas firms more closely due to their corporate scandals. Globally, oil firm managements have become more risk intolerant. They are sometimes under pressure to deliver results within a short time, which often negatively affect their ability to undertake risky ventures that are rewarding.Applying the Data Envelopment Analysis, this paper shows a high level of technical operational inefficiency of 0.51 in Nigerian oil industry over the period 2006-2009. The fall in technical efficiency of the oil firms in 2009 might be attributed to the banking crisis in Nigeria in 2009 that affected financial operations of some oil firms that relied on banking credits for running their business, and the fall in global oil prices relative to mid 2008

An Inter-temporal Analysis of Operational Efficiency of Oil Firms: Further Evidence from Nigeria

There have been growing needs to investigate oil and gas firms more closely due to their corporate scandals. Globally, oil firm managements have become more risk intolerant. They are sometimes under pressure to deliver results within a short time, which often negatively affect their ability to undertake risky ventures that are rewarding.Applying the Data Envelopment Analysis, this paper shows a high level of technical operational inefficiency of 0.51 in Nigerian oil industry over the period 2006-2009. The fall in technical efficiency of the oil firms in 2009 might be attributed to the banking crisis in Nigeria in 2009 that affected financial operations of some oil firms that relied on banking credits for running their business, and the fall in global oil prices relative to mid 2008. Keywords: Operational efficiency; oil firms; data envelopment analysis JEL Classifications: C14; H21; Q4

Nigeria: An Extension of Microeconomic Perspective of Demand for Money

The study examines the microeconomic foundation of money demand in Nigeria. It adopted weighted aggregate value of wealth to examine the problem of aggregation of monetary variables in Nigeria. Empirical analysis of the data from 1980 to 2004 using a co-integration test reveals an equilibrium behavior of money demand, wealth, composite consumer price index, and private consumption. It reinforces the fact that co-integration is purely a means to an end in analyzing the long-run relationship among variables. However, the use of simple sum aggregated variables in this study despite its being problematic yields different results. The micro attempt at aggregating these variables is therefore a probable solution to the problem at hand. The result shows that a positive impact of private consumption on money demand is negligible. On the other hand, the increase in inflation continues to pose a serious challenge to money demand,thus raising the desire to hold money. The demand for money consequently increases significantly as the wealth of few Nigerians increases.Key words: Demand for money, value of wealth, monetary variables, co-integration test., Nigeria

Re-examining Exchange Rate Regimes and Inflation Nexus: An ARDL Analysis for Nigerian Case

This paper seeks to re-examine the effect of exchange rate regimes on inflation in Nigeria. This is pertinent because exchange rate has remained devastated in Nigeria while the problem of high inflation lingers. Contrary to most studies on Nigeria, we tested the stability of our inflation model. We used the Autoregressive Distributed Lag (ARDL) approach for our analysis. The result shows that the past one year value of exchange rate has a negative and significant impact on the current inflation rate. Inflation rate increased more during the fixed exchange regime compared to the floating exchange rate regime. During the floating exchange rate regime, as the exchange rate increases, the inflation rate decreases and vice versa. The implication is that the floating exchange rate regime policy is preferable for combating increases in inflation rate compared to the fixed exchange rate. In addition, the lags of money supply have a direct relationship with inflation rate. The past two years value of interest rate also has a direct relationship with inflation rate. It is necessary that future studies on Nigeria consider wider spectrums of exchange rate regimes than ours

Dynamic Relationship between Debt and Cash flow in Pecking Order Theory: Evidence from Panel GMM

The paper investigates the relationship between cash flow and debt for South African firms. The difference generalized method of moment results show cash flow has significance and negative relationship with debt. Similarly, the system generalized method of moment results show negative relationship between cash with debt. The results affirmed pecking order theory of corporate financing and it reveals the incidence of asymmetric information problem between the firm and its financiers. Besides, the results imply a need to further develop South African capital market in order to reduce information asymmetry costs associated with raising external finance. Moreover, evidence of trade-off theory is also presented in the results which suggest that the dynamic nature of firms’ capital structure decision deserves attention. Keywords: Capital structure; debt ratio; cash flow; pecking order theory; panel GMM; South Africa

Deposit money banks’ efficiency in three years after, during and before the 2004–2005 consolidation in Nigeria: the puzzle on size

In this paper, the authors examined the efficiency of deposit money banks (DMBs) in Nigeria in three years after, during and before the 2004–2005 capital consolidation in Nigeria. This consolidation period was the last period the Central Bank of Nigeria implemented an official recapitalization policy of the deposit money banks in the country. The authors predicated the study on a modified intermediation and efficiency measurement frameworks. It utilizes deposits, fixed assets and employees as inputs, whose costs are interest payments, depreciation and staff expenses. Performing loans and advances, investments and liquid assets constituted the output variables. The authors computed the efficiency scores, using the Data Envelopment Analysis (DEA) approach. The data used were obtained from the DMBs that retained their identities and controlled over 75% of the banking industry’s total assets. They were purposively selected to maintain data consistency, and were size-classified by total assets. The findings show that small banks tend to be more cost efficient than medium and big banks. More so, medium sized banks tend to be more cost efficient than big banks, while big banks take the lead in cost efficiency score in post consolidation period. Cost efficiency of the banks was the highest during consolidation, followed by pre-consolidation and least in three years after consolidation