Inflation Dynamics in Nigeria: Implications for Monetary Policy Response

This study is an investigation into the appropriate price index that the monetary authority in Nigeria should monitor to ensure stable price level. It employed univariate autoregressive model to determine the persistence of headline, food (noncore) and nonfood (core) inflation and impulse response  function to determine the transmission effects between food and nonfood inflation.  The results showed that headline, food and nonfood inflation are persistent but headline inflation was shown to have highest level of persistence, followed by food inflation.  The fact that food inflation shows more persistence than nonfood is an indication that it transmits more shock to nonfood inflation than nonfood to food inflation. The impulse response function results showed that shocks from food inflation to nonfood are not only larger than shocks from nonfood to food but are also contemporaneous and as well have longer memory. This is an indication that food inflation is a vital component of price index in Nigeria. Therefore using headline inflation as the underlying inflation by the CBN is appropriate. Keywords: Inflation Dynamics, univariate autoregressive, impulse response, headline inflatio

Inflation Dynamics in Nigeria: Implications for Monetary Policy Response

This study is an investigation into the appropriate price index that the monetary authority in Nigeria should monitor to ensure stable price level. It employed univariate autoregressive model to determine the persistence of headline, food (noncore) and nonfood (core) inflation and impulse response function to determine the transmission effects between food and nonfood inflation. The results showed that headline, food and nonfood inflation are persistent but headline inflation was shown to have highest level of persistence, followed by food inflation. The fact that food inflation shows more persistence than nonfood is an indication that it transmits more shock to nonfood inflation than nonfood to food inflation. The impulse response function results showed that shocks from food inflation to nonfood are not only larger than shocks from nonfood to food but are also contemporaneous and as well have longer memory. This is an indication that food inflation is a vital component of price index in Nigeria. Therefore using headline inflation as the underlying inflation by the CBN is appropriate

Threshold-based asymmetric reactions of trade balances to currency devaluation: fresh insights from smooth transition regression (STR) model

This study sought to ascertain relatively the asymmetric reactions of trade balances to currency devaluation and non-devaluation regimes in sub-Saharan African (SSA) countries between 1981 and 2021 using the smooth transition regression (STR) model. The outcome indicates that, in Ghana, Malawi, and Mozambique, currency devaluation as a change in policy has a major influence on the trade balance; however, in Nigeria, Kenya, and Tanzania, this impact is negligible. Nigeria had the highest gamma coefficient but insignificant, suggesting that policy change has not significantly impacted the country’s trade balance despite the high transition rate. Findings from the devaluation regime revealed that, with the exception of Ghana, all other nations’ real exchange rates are inversely and significantly related to the trade balance. Additionally, it displayed an average threshold parameter of 0.147, indicating that a devaluation of more than 14.7% within a year will deteriorate the trade balance in SSA. The results indicate that the devaluation effects hinge on the structure, macroprudential policies, and infrastructural growth of the nation. The study recommended amongst other things, (i) a robust structural transformation in key sectors (ii) judicious investment in infrastructural development to address the key bottleneck in the quality and quantity of domestic production

Does Trade Liberalisation Policy Enhance Performance of Non-Oil Export Trade in Nigeria?

Decades after the trade liberalisation policy shift, poor performance problem of non-oil export in Nigeria (a net-oil exporting economy) persists. Against this backdrop, and given the lack of analytical depth among Nigerian-specific studies, this study empirically provided answer to the question of whether trade liberalisation policy enhances non-oil export trade in Nigeria. The study adopted an Autoregressive Distributed Lag model approach to the analysis of the impact of trade liberalisation policy on non-oil export trade. Evidence provided support for trade liberalisation policy as the growth driver for non-oil export, a sector that exports more but earns little in terms of revenue. As a result, the study recommends a well thought-out public–private partnership arrangement for the efficiency of the private sector (a major player in non-oil export trade), to optimally harness the benefits of liberalisation in Nigeria’s non-oil trade sub-sector. JEL Codes: F14, F17, F41, F62 </jats:p