Financial Sector Reforms and Monetary Policy in Nigeria

This paper reviews the impact of financial liberalisation on monetary policy in Nigeria, examining in particular the progress made in the transition from direct to indirect forms of monetary management. While recognising the inherent shortcomings of the previous direct control system, it highlights the difficulties that have been experienced in practice in moving to indirect controls. It argues that Nigeria’s inability to meet certain minimum conditions could to a great extent compromise the successful implementation of indirect controls. It concludes that a range of measures are needed, including far reaching measures on restructuring insolvent banks, introduction of powers to deal with offending market participants, development of the secondary market, plus a shift to a realistic exchange rate. Even when all these have been achieved, there remains the need to substantially reduce government fiscal deficits and remove ceilings on interest rates, without which the money market cannot function adequately. The paper raises serious questions about the advisability of implementing open market operations on a large scale at this stage of the economic reform

The Relationship between External Financial Flows and Economic Growth in the Southern African Development Community (SADC): The Role of Institutions

The study examined the relationship between external financial flows, domestic savings and economic growth in the SADC region for the period from 1980 to 2009 specifically looking at the role played by institutions. The majority of countries in the SADC region are experiencing low levels of savings, which has led to them relying more on external financial flows to bridge the gap between domestic demand for finance and domestic supply. However the relationship between external finance and economic growth is still a contentious issue. Given this, the study has thus examined the link between growth and external finance in the region, specifically focusing on the impact of the different forms of external financial flows on economic growth in the region incorporating the role played by institutions. The empirical results revealed that three types of external financial flows have a significant impact on economic growth in the SADC region except ODA; however when all the different types of external financial flows were interacted with the measure of institutions, they all become significant and more enhanced in explaining economic growth in the region. This supports the hypothesis that good institutions are necessary in promoting economic growth in developing countries. The empirical results also suggest that foreign capital is another channel through which a crisis in developing countries can be transmitted to the SADC region

Commercial bank offices and the mobilisation of private savings in selected sub-Saharan African countries

The mobilisation of domestic savings has remained a thriving issue in discussions of ways and means of harnessing resources for development in Africa. This work attempts to examine the role of a deliberate policy of extending offices of banks to the rural areas in savings mobilisation efforts. Using ordinary least squares methods, data from five African countries that have pursued this policy in recent times are examined, to see if there is any significant relationship between the savings rate and their population per bank office ratio. Our results are consistent with the hypothesis that the extension of branch offices of banks to rural areas could help attenuate the poor savings performance in most African economies.