An Empirical Analysis of the Effect of Stock Market Crisis on Economic Growth: The Nigerian Case

Stock market crashes are social phenomena where external economic events combine with crowd behavior and psychology in a positive feedback loop where selling by some market participants drives more market participants to sell. This study empirically established the relationship between stock market crisis and Nigeria’s economic growth and also showed the relationship between stock market price crash and the crisis itself. In this light, this paper examined the interactive influence of movements in the major indicators of the performance of the Nigerian Stock Exchange Market such as the Market Capitalization (MK), All Share Index (ASI), Number of Deals (NOD), Volume and Value of Stock (VV), Total Number of New Issues (TNI) and Inflation (INFR) on the Nigerian Gross Domestic Product (GDP) using data from 1985-2009. To achieve the two objectives stated above, the Ordinary Least Square (OLS) method was employed. To correct for the OLS result biasness the log was applied to GDP and MK and also AR(1) was introduced to the first model. The result shows that stock market crisis has a highly significant effect on Nigeria’s economic growth. The result also shows a significant relationship between stock market price crash and the market crisis itself. It is therefore recommended that in the face of the ongoing crisis in the global stock market, the Nigerian stock market authorities should aim at making the market meet a world class standard. Also, all the sectors of the economy should act in a collaborative manner such that optimum benefits can be realized from their economic activities in the Nigeria market even in the hub of global crisis

Attitude of Investors to Capital and Money Market Investments Before and After Financial Crisis: Evidence from Nigeria

ABSTRAC

Exchange Rate Management and Sectoral Output Performance

The goal of every economy is to have a stable exchange rate with the countries it trades with; therefore exchange rate is very vital to the economy of every country. Nigeria has adopted both fixed and fluctuating exchange rate regimes in order to achieve the goal of a realistic exchange rate but this has proven futile as the economy has continued to perform poorly over the years. This study is therefore aimed at examining the effect exchange rate management has on the output performance of both the agricultural sector and the manufacturing sector. Secondary data from 1981 2015 were analyzed using the Ordinary Least Square technique. The results showed that exchange rate has a positive and significant effect on only the agriculture sector. The study recommends amongst others that efforts should be made to increase the exportation of agricultural products in order to boost exchange rate

The Disappointing Performance of Foreign Direct Investment in Industrial Development in Sub-Saharan African Countries

The Sub-Saharan African region compared to other developing regions has been the most vulnerable as regards foreign capital inflow. The flow of FDI is expected to result into advanced managerial and  technological capacities and acceleration of  industrial development. The study examined how the flow of FDI to the sub-Saharan African region has impacted the industrial development of the region, using the proxy of industry value added growth. The study made use of pooled data from thirty three sub-Saharan African countries within the period 1993 and 2012.The method of analysis utilized for the study was the fixed effect least-square dummy variable model, employed to estimate the impact of foreign direct investment on industrial development for the selected host countries. The study finds that foreign direct investment is statistically significant in relation to industrial development for host Sub-Saharan African countries; but it is disappointing that the expected desired features of industrial development, like increased manufacturing outputs, reduction in high level of import and manufactured goods; etc, have not been realized. It is therefore recommended that the governments of host countries should put policies in place to encourage development of industries domestically, to enhance sustained industrial development, such that dependence on external financial assistance and borrowing could be reduced, resulting in sustained increases in non-oil export earnings, domestic income, savings, investment, technology, and hence improved living standard. Keywords: Foreign Direct Investment; Industrial Development; Sub-Saharan African Countries JEL Classifications: F21, O1

Fraud Prevention and Internal Control in the Nigerian Banking System

Fraud and internal control issues dominate banking operations as concerns that impinge adversely on banks' reputation for safety and performance. This paper examines the issues of internal control vis a vis fraud prevention in the banking industry, adopting both primary and secondary data. Primary data was used to test internal control while secondary data were employed to test fraud prevention. The main primary variables were separation of duties, monitoring, and staff qualifications while the main secondary variables are bank profit, regulation, technology and M2. In both cases regression techniques were adopted. The results show that internal control on its own is effective against fraud, but not all staffs are committed to it, while the secondary data is quite supportive of the primary data but more exemplifying in that M2, staff qualifications and technology were significant throughout the various dependent variables. It is also clear from the regressions that technological based fraud is significant. The paper recommends the continuation of the cashless policy of the Central Bank to reduce available cash and improvement in educated staff engagement to reduce fraud in the banking system. Keywords: Deposit Money Banks; Internal Control; Fraud Prevention; Regulation; Cashless Policy JEL Classifications: G21, G3

Leverage and firm performance: New evidence on the role of firm size

In this paper, we draw on the Hansen (1999) threshold regression model to examine the empirical links between leverage and firm performance by means of a new threshold variable, firm size. We ask whether there exists an optimal firm size for which leverage is not negatively related to firm performance. Accordingly, with a panel data of 101 listed firms in Nigeria between 2003 and 2007, we explore whether the ultimate effect of leverage on firm performance is contingent on firm size; that is, whether the type of impact that leverage has on the performance of a firm is dependent on the size of the firm. Our results show that the negative effect of leverage on firm performance is most eminent and significant for small-sized firms and that the evidence of a negative effect diminishes as a firm grows, eventually vanishing when firm size exceeds its estimated threshold level. We find that this result continues to hold, irrespective of the debt ratios utilized. In line with earlier studies, our results show that the effect of leverage on Tobin’s Q is positive for Nigeria’s listed firms. However, our new finding is the evidence that the strength of the positive relationship depends on the size of the firm and is mostly higher for small-sized firms

Effects of Import on The Growth of Small And Medium Scale Enterprises in Nigeria

This study evaluates the effects of importation on the growth of small and medium scale enterprises (SMEs) in Nigeria for the period between 1992 and 2017. The study employs the unit root test approach of Augmented Dickey Fuller (ADF) to examine the order of integration of the variables and the co-integration test was carried out using the Autoregressive Distributed Lag (ARDL) Bounds test to check whether a long-run relationship exists among the variables of this study. The co-integration test result shows that a long-run relationship exists among the variables indicating that they all converge in the long-run. The empirical results show a significant direct relationship between SME growth and imports in Nigeria both in the short-run and long-run. Further, the results revealed that lending rate and commercial banks’ credits to SMEs are inversely related to SME growth while exchange rate has a positive impact on SME growth in Nigeria. This study therefore recommends that the Nigerian government should diversify the Nigerian economy and local sourcing of raw materials should be encouraged to enhance backward and forward linkage of the various sectors of the Nigerian economy. The lending rate should also be lowered as much as possible so as to encourage SME investors. It also recommends that the Nigerian government make concerted efforts geared towards encouraging local producers and infant industries to produce the raw materials and capital equipment that SMEs would have otherwise imported from other countries