Modeling MSMEs Financing and Economic Growth: Evidence from Nigeria

MSMEs constitute the driving force in the attainment of industrial growth and development. Several previous studies have examined the relationship between MSMEs financing and economic growth in Nigeria but the results of these studies are still mixed. Therefore, this paper examines the causality between MSMEs financing and economic growth in Nigeria during the periods 1992 to 2013. However, the analysis technique of this study differs from the previous studies as the approaches of the previous studies are not adequate in obtaining robust estimates and drawing meaningful inference given the potential impact of MSMEs financing on economic growth. Unlike previous studies that totally relied on traditional methods for unit root testing, co-integration analysis, and causality test, our study relies on the ultra-modern econometric methods such as; the Ng-Perron modified unit root test, Autoregressive Distributed Lag (ARDL) Bound testing approach to co-integration, parsimonious ECM version of ARDL model, and the Toda – Yamamoto causality procedure. The empirical results indicate evidence of a stable long – run relationship among the chosen variables. The Toda – Yamamoto causality test show evidence of a unidirectional causality running from MSMEs financing to MSMEs output, a bi-directional causality between MSMEs output and economic growth, as well as, a unidirectional causality running from MSMEs financing to economic growth in Nigeria during the periods covered. The study therefore recommends that the government through the monetary authority (CBN) should energize the MSMEs by instituting a programme that will adequately promote the financing of MSMEs with relatively low interest rate for sustainable economic growth. Keywords: MSMEs financing, economic growth, Ng- Perron, ARDL, Toda– Yamamot

A Three-Factor Model of Inclusive, Sustainable and Resilient Economic Development for Developing Countries

Nigeria had adopted various development plans in order to achieve MDGs.Achievement of MDGs is crucial to effective implementation of SDGs agenda aimed at fostering inclusive, sustainable and resilient economic development. In spite of these efforts, the Nigerian economy is still characterized by low capital formation, chronic unemployment, a large percentage of the population living on primary sector and negligible savings. Indeed, Nigeria’s performance in MDGs was quite unimpressive. This is partly attributable to inappropriate human capital theory of economic growth on which these development plans were based. Therefore, this study focused on building a model of inclusive, sustainable and resilient economic development which would yield potent factors and describe activities that could link human capital investment with aggregate economic activities to induce economic development with full participation of target population. The study covered the period, 1981 - 2014. Data were sourced from Central Bank of Nigeria, National Bureau of Statistics and World Development Indicators. Data were analyzed using exploratory factor analysis technique. Study revealed that minimum wage, girl-child education and special intervention fund were factors which influenced the relationship among human capital, real GDP and economic development. It was concluded that the outcome of this study which is a three-factor model of inclusive, sustainable and resilient economic development is essentially a human capital theory of economic development capable of linking the different sectors of the economy. It was recommended, inter alia, that a dynamic employment policy would involve economic empowerment of women through job reservation in paid labour

Tax-financing of Budget Deficits in LDCs: Re-validation of Laffer Curve Theory

Urgent need for quick action to put Nigeria and other developing economies back to the path of economic recovery has almost imposed state of emergency on these economies. Most LDCs are faced with acute shortage of development funds due to recessions accompanying incessant crashes in international financial market. Raising existing tax rates to finance budget deficit in LDCs often generates public debate on pros and cons of such policy option. Study considered Nigeria as typical case of LDCs. Study focused on establishing the effectiveness of tax-financing of budget deficit under Laffer curve theory. Study spanned across 1970-2015. Data were analyzed using ADF, CUSUM, heteroskedasticity, multiple regression, Johansen cointegration and ECM. Results indicate that: (1) Custom and exercise duties, petroleum profit tax and value-added tax contributed significantly to the reduction in budget deficit while company income tax had nonsignificant impact(2)Total government revenue constituted major chunk of planned income for budget deficit financing(3) Deficit financing of capital health expenditure yielded high returns while that of recurrent education expenditure and capital education expenditure was accompanied by low returns (4)Growth and employment generation accelerated deficit financing while private investment decelerated it (5) There were long and short-run relationships among budget deficit, taxes, human capital investment and macroeconomic indicators with significant rate of adjustment of short-run disequilibrium. Study concluded that tax-financing of budget deficit was effective under Laffer curve effect. It was recommended, among others, that LDCs should enlarge their tax bases through inclusion, to finance budget deficit

Tax-budget Deficit Relationships: Fiscalists’ Platform for Deficit Financing Policy

With heavy debt burden on developing economies accompanied by their low credit worthiness rating, developing economies often resort to taxes for financing development projects. Raising tax rates and expanding tax bases have become frequent government activities in developing economies. Without dynamic deficit financing policy which takes into cognizance the conflicting arithmetic and economic effect of Laffer curve analysis, financing budget deficit through taxation has remained largely unsuccessful. Perhaps, what was required is to constitute latent factors operating along Laffer curve into major theoretical construct of a deficit financing policy. Therefore, study focused on identifying latent factors influencing the inter-relationship among budget deficit finance, taxes, human capital and macroeconomic indicators. Study spanned across 1970-2015. Data were sourced from Central Bank of Nigeria, National Bureau of Statistics and World Development Indicators. Data were analyzed using exploratory factor analysis. Results indicate that: (1) Tax contributed significantly to budget deficit financing (2)Tax spending and disposable personal income were latent factors influencing the effectiveness of deficit financing (3) Tax spending activated government revenue to contribute significantly to budget deficit reduction (4) Disposable personal income boosted GDP to cause reduction in budget deficit . It was concluded that, with the taxonomy of highly significant factor correlates of tax spending and disposable personal income, a viable deficit financing policy was devised with component tax, budgetary, pricing, credit and macroeconomic policies. It was recommended, inter alia, that developing economies should activate their current deficit financing policies by adapting them to their tax spend and macroeconomic policies

Does greenhouse gas emission have any relevance to per capita health expenditure? Empirical evidence from Nigeria

The quest to achieve sustainable development in the world has led to higher energy consumption which invariably leads to increasing environmental pollution through greenhouse gas emissions. Environmental pollution poses dangers to human health and the need to protect human health increases pressure on health care expenditure. Human capital development is necessary for any economy to achieve sustainable development. This study is an attempt to examine if greenhouse gas emissions have any impact on per capita health expenditure in Nigeria, using data from 1990 to 2015. The study is anchored on the Environmental Kuznets’ Curve Hypothesis that postulates an inverted u-shaped relationship between the environment and income. The bounds test technique was used to estimate the long-run relationship between the dependent and the explanatory variables while the error correction method within the ARDL model was used to estimate the speed of adjustment. The paper found that greenhouse gas emissions have negative but statistically significant influence on health expenditure in Nigeria. Gross domestic product, population density and mortality rate were all statistically significant suggesting that these variables were important in influencing health  expenditure in Nigeria in the long run. The paper therefore recommends that companies that emit gases should be taxed for these emissions and the revenue directed towards environmental management.Keywords: ARDL, Environment, Greenhouse gases, Health expenditure, Pollutio

Impact of Fiscal Policy on InclusiveGrowth in Nigeria

Among the macroeconomic goals of the Nigerian government are the following objectives: to stimulate economic growth, reduce unemployment, poverty, and inequality. To achieve these objectives, the government continues to alter its expenditure pattern. Despite these policy changes, the rates of unemployment, poverty, and inequality continue to increase. The objective of this study is to investigate how fiscal policy can be designed to promote inclusive growth as well as identify the most effective fiscal policy instrument that can lead to inclusive growth in Nigeria, using annual data from 1980 to 2017. The Structural Vector Autoregressive (SVAR) model was adopted for the analysis. The result shows that government capital expenditure is a more effective fiscal policy instrument forachieving inclusive growth in Nigeria. The dominance of the shocks to tax revenue has a higher impact on unemployment than on poverty and per capita GDP growth rate. Based on these findings, it is recommended that the Nigerian government should strengthen the mobilisation of tax revenue and channel it towards government capital expenditure in order to promote inclusive growth in Nigeria. Keywords: Economic growth, fiscal policy, inclusive growth, government expenditur

Modelling the dynamics of cryptocurrency prices for risk hedging: The case of Bitcoin, Ethereum, and Litecoin

AbstractCryptocurrencies have, over the years, gained an unprecedented prominence in financial discourse, with the market fielding over 5,300 digital currencies and reaching over $2 trillion in market capitalisation in 2022. The surge in market values of digital currencies and their popularity in the world of e-commerce have remained unabated and equally received special attention from researchers focusing on identifying the underlying factors that drive changes in their market values. Thus, this study models the dynamics of the prices of cryptocurrencies alongside their interconnectedness, focusing on Bitcoin, Ethereum, and Litecoin along the time and frequency dimensions of monthly data from 1 March 2016 to 05/31/2022. Based on the ARDL model, results show that the volume of transactions of Bitcoin, Ethereum, and Litecoin, oil prices, and gold prices exert a more significant positive influence on their prices in the longrun than in the shortrun. However, the publicity of the selected cryptocurrencies (google search rates) does not significantly influence their prices. Interestingly, results from the Wavelet Granger causality tests show no causality between the raw series of Bitcoin, Ethereum, and Litecoin prices. However, a bi-directional causality exists between Bitcoin and Ethereum prices during the longrun in their low frequencies, a unidirectional causality running from Bitcoin to Litecoin prices during the longrun in their low frequencies, and a unidirectional causality running from Litecoin to Ethereum prices during the shortrun, medium run and longrun in their high, medium, and low frequencies. These findings have profound implications for the global financial market and investor decisions

Monetary-Fiscal Policy Mix and Stock Market Performance in Nigeria: The Role of Quality of Governance and Political Stability

This study examined the impact of mixed monetary –fiscal policy measures on the performace of capital market in Nigeria.  The study made use of annual data on value of stocks traded, credit to the private sector, gross domestic product, inflation domestic investment and broad money supply, political stability and quality of governance among other from 1970-2020. This study employed the vector autoregressive model, the impulse response function and variance decomposition and the result suggested that credit to the private sector and broad money supply had a negative and insignificant impact on capital market capitalization while inflation impacted positively, although insignificant on capital market performance. The result further showed that investment and government expenditure as fiscal variables had a negative and insignificant impact on capital market performance. Quality of governance negatively and insignificantly impacted on capital market performance while political stability had a positive and insignificantly impacted on capital market performance. From the variance decomposition and impulse response function, the result showed that market capitalization was strongly endogenous in predicting itself by about 93 percent in the short-run and about 86 to 85 percent in the long-run. This study therefore recommended among others the need to combine monetary and fiscal policy measures in order to stabilize prices and promote investment in the stock market. JEL Classification: C32, E44, E52, G18 Keywords: fiscal policy, monetary policy, quality of governance, stock market DOI: 10.7176/JESD/14-17-05 Publication date: November 30th 202