Testing the validity of free cash flow hypothesis: Evidence from Nigeria

Purpose: This study empirically tests the validity of the free cash flow hypothesis among firms quoted on the Nigerian Stock Exchange (NSE) from 2007 to 2017. Research methodology: The study employed a dynamic panel system Generalized Method of Moments (GMM) in analyzing the data generated. Results: the result failed to provide empirical evidence in support of the Jensen free cash flow hypothesis in Nigeria. The equally showed that a high concentration of shareholding in the hand of a few individual increases the amount of dividend paid out to shareholders. The result is however robust using different methods.  Limitations: We focused only on testing the validity of the free cash flow hypothesis proposed by Jensen (1986). Contribution: The study provided empirical evidence that invalidates the propositions of the free cash flow hypothesis among publicly quoted firms in Nigeria. The result is robust using different estimation techniques.  Keywords: Free cash flow hypothesis; Dividend payou

GROWTH IMPACT OF SAVINGS ON THE NIGERIAN ECONOMY

Savings in an economy can assume one of the several forms. These includes: Personal savings, corporate savings or business savings and Government savings. This study evaluated growth impact of savings on the Nigerian economy. The study specifically examined the effect total savings, private consumption expenditure, gross fixed capital formation and core credit to the private sector on the gross domestic product of Nigeria. Data for the study were sources from CBN statistical bulletin for a period of ten (10) years spanning through 2011 to 2020. The sourced data were analysed using multiple regression analysis, result of the analysis shows that total savings has positive and significant effect on the gross domestic product of Nigeria. It was also observed that private consumption expenditure has a negative and insignificant effect on the gross domestic product of Nigeria. The study further revealed that gross fixed capital formation has a negative and significant effect on the gross domestic product of Nigeria. It was also observed that core credit to the private sector has positive and significant effect on the gross domestic product of Nigeria. Based on the findings, the study recommends that the government should set a sound and fertile environment in order to foster domestic saving that will help to increase the level of economic growth in Nigeria. Government should increase the deposit rate of the deposit money banks in Nigeria through monetary policy. Government should transform the financial sector of the country. Government should create favorable condition in order to mobilize domestic savings from the small depositors.JEL: D01; D31  Article visualizations

Attaining Inclusive Growth in a Developing Economy on the Wings of Micro, Small and Medium Scale Enterprises

A typical disturbing feature of most developing countries is a sprawling disparity between economic growth as measured by increase in gross domestic product and concrete progress in real welfare of the citizenry measured by standard of living, access to employment and poverty reduction. Contrary to natural logic, available evidence suggests that both variables are inversely related.  There is equally a consensus among scholars of inherent potential of micro, small and medium enterprises (MSMEs) as a veritable agency for income and prosperity spread and thus a vehicle for inclusive growth. This paper empirically investigates the nexus between MSMEs and inclusive economic growth. With data ranging from 1980 to 2016, it specifically built econometric model to capture the link between Gini coefficients (proxy for inequality gap) and identified key determinants of viable MSMEs sub-sector: volume of credit to MSMEs, MSMEs’ contribution to national output, lending cost, cost of doing business, and infrastructural financing. With error correction model technique of analysis, findings revealed that MSMEs has the potential to provide growth that will spread prosperity to the majority of citizenry thereby narrowing inequality gap and reducing poverty. The paper recommends policy shift in favour of creating environment to promote the growth of MSMEs

DEFICIT FINANCING AND ECONOMIC RECOVERY

Regardless of the vast amount of debt Nigerian government accommodate annually, the projected level of development is not realized as sizeable percentage of her citizens still lives in miserable poverty, low standard of living and soaring level of unemployment and so on. Consequently, one starts to question why the theoretical proposition seems not to be working in the Nigerian perspective. It is based on these commotions that this research work seeks to scrutinize the effect of deficit financing on recovery and development of the Nigerian economy between the periods 1981 to 2015 employing error correction model and granger causality test. Study exposes that Federal Government external debt displays a significant P-value of 0.0173 with a positive coefficient of 0.000031 signifying that 1% increase in government external debt is capable of intensifying economic recovery and development in Nigeria to the tune of 0.00003. The details of the causality test also corroborate the report in the error correction model and thus advocate that external debt extensively adds to the development of the Nigeria economy while domestic debt and deficit budget does not give the impression to granger cause economic development in Nigeria. On this basis, study affirms that deficit financing is a crucial incentive in advancing economic development in Nigeria if effectively disbursed for the primary rationale for which it was meant for. Additionally, study thus authenticates the Keynesian theory of the existence of positive relationship between deficit financing and economic recovery. On this note, study recommends that executives of the Nigerian economy should harmonize the appropriation of borrowed fund and make certain that it is well utilized towards improving the capital and production dominance of the nation as this will further boost the realization of accomplishing a sustainable level of economic development in Nigeria. Article visualizations