Public Debt and Public Expenditure in Nigeria: A Causality Analysis

This study investigated the causal relationship between total public debt and public expenditure in Nigeria from 1980 to 2015.The focus of the study is to determine if government borrowing in Nigeria is based on the need to provide social services and infrastructure as provided in the budget or by mere reason of privileged access to financial institutions both domestically and internationally as posited by Adam Smith (1776) in his theory of public debt. Applying co integration, vector error correction model and Wald test econometric tools of analysis to public debt, government capital expenditure, government recurrent expenditure and interest rate variables within the study period, the study obtained the following results. The trace statistics indicates two (2) co integration equations at five percent (5%) level of significance, suggesting that there is a long run relationship among the variables tested and that the results can be relied upon in taking long run policy decisions in the economy. The findings of the VEC test indicate that government capital and recurrent expenditure has significant positive relationship with public debt in the Nigerian economy. The Wald test result shows that unidirectional causality runs from both capital and recurrent expenditure to public debt in Nigeria. An obvious implication of this result is that government borrowing in Nigeria is triggered by government deficit budgeting, a situation which is well known in Nigeria at both federal and state levels. It therefore becomes necessary that the government budgeting process need to be reexamined to ensure that allocative efficiency is achieved in our budgeting system and that borrowing to finance budget deficit must be done objectively and realistically. This study therefore recommends the introduction of planning-programming-budgeting systems (PPBS) and Zero based budgeting (ZBB) in preference to the current practice of incremental budgeting (IB) in our public finance at both federal and state levels as is the current global practice considering that these budgeting approach seeks to intensify competition for budget resources and consequently aids the realization of government fiscal policy goals in the economy. Keywords: public debt, government capital expenditure, government recurrent expenditure, causality, Allocative efficiency, Zero based budgeting, fiscal policy

Foreign Portfolio Investment and Stock Market Growth in Nigeria

This study is designed to determine the impact of foreign portfolio investment inflows on stock market growth in Nigeria from 1986 to 2014. The study used co-integration, vector error correction model and Granger Causality econometric tools. The results obtained includes the following: the trace statistics indicates one(1) co-integrating equation at 5% level of significance, the vector error correction model indicates long-run significant impact of foreign portfolio investment on stock market growth in Nigeria, and the Granger Causality shows there is no causality between foreign portfolio investment and stock market growth in the Nigerian economy. The implication of the results is that foreign portfolio investment (FPI) inflows may not contribute positively to the increase in stock market when there is no conducive business environment for foreign investments to thrive in Nigeria. The study recommends that Federal Government of Nigeria should strengthen the Security and Exchange Commission (SEC) to promote constant inflows of foreign portfolio investment to Nigeria. That Nigeria Government should develop capital markets so that domestic trade volume should increase more than foreign portfolio investment (FPI) because of the existence of huge risk premium in Nigeria and that Central Bank of Nigeria (CBN) should be proactive in regulating foreign exchange transactions in Nigeria since the country is import-dependent country. Keywords: Portfolio investment, Stock market Growth, Co integration, Central Bank of Nigeri

Analysis of Oil Import and Exchange Rate in Nigeria

This research investigated the relationship between oil import and exchange rate in Nigeria from 1981 to 2015. The objective of the study is to analyze the impact of oil import on the rate of exchange in Nigeria. The study adopted co integration test to ascertain the long run relationship among the variables and vector error correction mechanism to determine the influence of LOIMP on EXR. The findings from the research indicated negative insignificant relationship between oil import and exchange rate in Nigeria in the short run and negative significant correlation in the long run. CUSUM test established that the model for the estimation was stable and impulse response asymptotic analysis revealed a negative impact of oil import on exchange rate in Nigeria. Causality test in this study showed one way causation from EXR to LOIMP. The study concludes that oil import has contributed negatively to developments in the Nigerian economy and the continued depreciation of the exchange rate. Based on the negative result of oil import on exchange rate in Nigeria, the study suggests that government should restructure, transform and legalize all the local (illegal) refineries operating in the Niger Delta region, in addition to making our four refineries operate in full capacity, so as to increase the productive capacity of the country,  meet up with the domestic demand for refined oil products in the country, discourage importation of refined products  and create employment which is one of the macroeconomic problem that kept the economy in its current state. These outfits should be licensed and structured into efficient production units, underlined by quality control. Government should sincerely initiate policy that will track government and private oil investors who deliberately frustrate refining of crude oil within Nigeria due to their selfish reasons. Policies towards diversification of Nigerian economy should be encouraged and imbibed, this will reduce overdependence on oil revenue and pressure on our local currency. Keywords: Exchange rate, Oil import, Impulse Response, Nigeri