Foreign Financial Resources Inflows and Stock Market Development: Empirical Evidence from Nigeria and Ghana.

This study empirically investigates the effects of the inflows of foreign financial resources into Nigeria’s and Ghana’s economies, on the development of the countries’ stock exchanges. Using annual time series data covering the period – 1988 to 2011 for Nigeria, and 1991 to 2011 for Ghana, adopting market capitalisation–GDP ratio (MCR) as proxy for stock market development, and employing multiple linear regression technique, the study finds that with the exception of external debt-GDP ratio (EXDTR), the ratios of  inflows of other foreign financial resources (foreign direct investment (FDI), foreign portfolio investment (FPI), personal remittances received (PRR), official development assistance and aid (ODAA)) to GDP, were positively related to MCR, although the relationship between ODAA-GDP ratio and MCR in Nigeria was statistically insignificant within the sample period. On the other hand, FDI-GDP, PRR-GDP and EXDT-GDP ratios were observed to be significantly, negatively related to MCR in Ghana, while ODAA-GDP ratio was positively related to it, indicating that, of all the forms of foreign finances considered, ODAA has been the most relevant in the development of Ghana’s stock exchange. Policy recommendations of the paper include the creation of conducive macroeconomic, socio-political environment required to attract more foreign direct and portfolio investments, as well as enhance the profitability of quoted firms whose securities are listed on the exchange, keeping external public debt at manageable levels, encouraging more firms to get listed the stock exchanges, reducing the cost of stock exchange transactions, proper regulations of the activities of market players, etc. Keywords: Foreign Finance Inflows, Nigerian Stock Exchange, Ghana Stock Exchange, Stock Market Development

Is Monetary Expansion Always and Everywhere, Detrimental to Capital Inflows? Some Policy Lessons for Nigeria.

The paper employs error correction methodology to investigate the effect of monetary expansion on the flow of FDI into the economies of Nigeria, Ghana, Argentina, Australia, China, the U.S. and the U.K. using annual time series data covering the period from the 1980s to 2010/2011, sourced from the World Bank’s World Development Indicators. The empirical evidence indicates that monetary expansion has negative, but insignificant effect on FDI inflows in middle-income countries of Nigeria, Ghana and Argentina, and positive effect on FDI inflows in high income countries of Australia, China, the U.K. and the U.S., though the effect in U.K. and U.S. is statistically insignificant. With the exception of Ghana and Australia, the paper also finds that economic growth has positive effect on net FDI inflows, though insignificant for the U.K economy.  The paper argues that monetary expansion is not always and everywhere detrimental to FDI inflows, but that the effect depends on several factors such as the source of the expansion, level of development of the financial system, economic growth, etc. The paper recommends inter alia that the middle- income countries channel efforts at developing their financial systems and the growth-linked sectors of their economies so as to attract more FDI, and assuage the negative effects of excessive FDI inflows, ultimately enhancing the growth of the economy

Effects of Economic Openness and Inflation on Commercial Banks’ Profitability: Panel Data Evidence from Nigeria, Post-Banking Sector Consolidation (2005-2012).

The paper employs panel data estimation techniques to investigate the effects of economic openness (trade and financial openness) and inflation on commercial banks’ profitability in Nigeria. Using panel data for the period 2005 to 2012 on a sample of 14 commercial banks in the country, the empirical analysis based on the random effect model selected on the basis of Hausman test result indicates that the impact of financial openness on commercial banks’ profitability was positive and significant while the impact of trade openness was also positive, but statistically insignificant. Inflation and bank size were also observed to have had insignificant impact on banks’ profitability in the study period. Further evidence from the analysis is that financial openness and inflation adversely affected commercial banks’ profitability in the heat of the global financial crisis (2007-2010), marked by the downward trends in return on asset of most of the banks within the period. These findings suggest inter alia that economic openness could enhance the profitability of commercial banks if the banks could take advantage of the opportunities it offers. The paper therefore recommends greater integration of the country’s economy with the global market, active participation of Nigerian banks in trade finance and merchant banking, establishment of foreign branches of the commercial banks in other countries particularly in countries with fast growing economies, quality asset management, some restriction in cross-border capital flows and lowering the rate of inflation particular in periods of global financial crisis, etc. to enhance the profitability of the commercial banks. Keywords: Financial Openness, Trade Openness, Inflation, Commercial Banks’ Profitability, Panel Data Estimation, Nigeria

Do Government Expenditure and Debt Affect Stock Market Development in Nigeria? An Empirical Investigation

Each year, stock market players in Nigeria look forward to the passage and implementation of the annual budget to stimulate and boost transactions in the market. However there appears to be a dis-connect between government spending and value of transactions therein. The effect of government debt (domestic and external) on the development of the stock market has also been an issue of concern to stakeholders. This paper employs the methodology of cointegration and error correction mechanism to investigate the effect of government expenditure and government debt on value of transactions on the trading floors of the Nigerian Stock Exchange (proxy for stock market development) using annual time series data sourced from the Central Bank of Nigeria Statistical Bulletin. The empirical evidence indicates inter alia that the short-run and long-run effects of federal government recurrent expenditure, domestic debt and external debt on value of transactions on the Nigerian Stock Exchange are statistically insignificant. Government capital expenditure is observed to have had significant negative short-run and long-run effects on value of transactions on the stock market. The implications of the findings and policy options to enhance the value of transactions on Nigeria’s stock market are discussed. Keywords: Government Debt, Government Expenditure, Stock Market Development, Nigerian Stock Exchang

Asymmetric Effects of Money Supply Growth on Economic Growth in Nigeria

The study employs the Shin-Greenwood-Yin nonlinear autoregressive distributed lag (NARDL) approach to cointegrating and error correction modeling to examine the asymmetric effects of broad money growth on economic growth in Nigeria. Annual time series data spanning the period from 1981-2016 are used for the analysis. The study finds asymmetric relationship between the variables in the short run as positive change in broad money growth is found affect economic growth positively and significantly, while negative change is found to have negative, but more sizable and more significant effect on growth. The study also finds no significant effect of positive change in broad money growth on economic growth in the long run. Negative change in broad money growth positively and significantly affects economic growth in the long run. Further evidence from the study are that growth in government financial consumption expenditure positively affects economic growth in the short- and long-run, while inflation adversely affect growth in both time horizons. Based on the evidence, it is recommended that to achieve long run growth, growth of money supply and inflation should be controlled, and government final consumption expenditure should be increased to boost economic activities.&nbsp

ECONOMIC GROWTH AND EMPLOYMENT IN NIGERIA’S SERVICES SECTOR

The paper examines the effect of economic growth on employment in Nigeria’s services sector during the period from 1991 to 2020. The ARDL approach to cointegration and error correction modeling is employed for the analysis. The study finds that economic growth spurs employment generation in the services sector in the short-run and in the long-run. It further finds that employment generation in the services sector is also spurred by trade openness and financial sector development, but adversely affected by inflation. In view of these, it is recommended that Nigeria’s government intensify effort in accelerating the nation’s economic growth, bringing inflation under control, developing the nation’s financial system and cautiously integrating the economy with the global market