Effect of Monetary Policy on the Performance of the Nigerian Capital Market (1986-2016): Stylized Facts from ARDL Approach

In this study, the empirical effect of monetary policy tools on performance of the Nigerian capital market was re-examined. The real effect of monetary policy tools on capital market performance is still not clear both from theoretical and empirical background, especially in emerging economies like Nigeria. Explicitly, this study evaluated the effect of monetary policy rate (the rate at the Central Bank of Nigeria extend credit facility to other financial institutions operating in the country), cash reserve ratio, liquidity ratio and loan to deposit ratio on the performance of the Nigerian capital market. Nigerian Stock Exchange and Central Bank of Nigeria annual reports of various edition supplied the relevant data for analysis. The Autoregressive Distributive Lag (ARDL) was the technique applied in estimating the model and for co-integration assessment, while granger causality analysis aided in ascertaining the effect of monetary policy tools on capital market performance. The result of the analysis illustrated that monetary policy tools and capital market performance in Nigeria are not co-integrated. The study also found that Nigerian capital market performance is not significantly affected by monetary policy announcement by the Central Bank of Nigeria rather, it is monetary policy rate that is significantly influenced by performance of the capital market. Based on the application of a superior methodology by way of ARDL in data analysis, the Central Bank of Nigeria should be cautious and properly consider the prevailing macroeconomic condition in monetary policy decision, especially with regard to liquidity ratio because of its potential in fuelling or deterring inflation which affects prices of stocks in the capital market

Fiscal deficit in an oil dependent revenue country and selected macroeconomic variables: a time series analysis from Nigeria (1981-2015)

In this paper, we determine the effect of fiscal deficit on selected macroeconomic variables in Nigeria by specifically evaluating the effect of fiscal deficit on gross domestic product, money supply and inflation. To achieve these objectives, we employed various econometric techniques such as unit root test, Johansen co-integration, granger causality test in which variations in gross domestic product; money supply and inflation were regressed on fiscal deficit and exchange rate using time series data from 1981 to 2015. Secondary data casing the time frame were collected from Central Bank of Nigeria statistical bulletin. The result of the analysis reveals that fiscal deficit has no significant effect on gross domestic product, money supply and inflation in Nigeria. The finding also shows that there is a positive insignificant relationship between fiscal deficit and gross domestic product which measure the growth of an economy at given period of time. This is in line with the Keynesian postulation of the existence of positive relationship between fiscal deficit and macroeconomic variables. Based on the findings, government should allocate and effectively monitor funds sourced as a result of fiscal deficit to providing critical economic infrastructures such as electricity, access road, health, communication among others to reap the benefits associated with fiscal deficit. Monetary policy should be structured in such a way as to compliment fiscal policy so that the level of inflation would be lowered whenever government relies majorly on fiscal deficit as an instrument of fiscal policy

FISCAL DEFICIT IN AN OIL DEPENDENT REVENUE COUNTRY AND SELECTED MACROECONOMIC VARIABLES: A TIME SERIES ANALYSIS FROM NIGERIA (1981-2015)

In this paper, we determined the effect of fiscal deficit on selected macroeconomic variables in Nigeria by specifically evaluating the effect of fiscal deficit on gross domestic product, money supply and inflation. To achieve these objectives, we employed various econometric techniques such as unit root test, Johansen co-integration, granger causality test in which variations in gross domestic product, money supply and inflation were regressed on fiscal deficit and exchange rate using time series data from 1981 to 2015. Secondary data casing the time frame were collected from Central Bank of Nigeria statistical bulletin. The result of the analysis revealed that fiscal deficit has no significant effect on gross domestic product, money supply and inflation in Nigeria. The finding also shows that there is a positive insignificant relationship between fiscal deficit and gross domestic product. This is in line with the Keynesian postulation of the existence of positive relationship between fiscal deficit and macroeconomic variables. Based on the findings, government should allocate and effectively monitor funds sourced as a result of fiscal deficit to providing critical economic infrastructures such as electricity, access road, health, communication among others to reap the benefits associated with fiscal deficit. Monetary policy should be structured in such a way as to compliment fiscal policy so that the level of inflation would be lowered whenever government relies majorly on fiscal deficit as an instrument of fiscal policy.  Article visualizations

Required Minimum Shareholders' Fund and Bank Performance: A Substantiation from the Nigerian Banking Sector

The performance of the banking sector is very critical for the survival of the financial system, especially in a developing country like Nigeria where productive economic activities rely more on the banking system compared to the stock market for finance. In this regard, the effect of required minimum shareholders’ fund on banks’ performance in Nigeria was ascertained over a period of seventeen years, that is, from 1999 to 2015 by distinctively assessing the effect of minimum capital requirement on profit before tax and net interest income of the banking sector. Controlling banks’ specific factors: total assets plus off balance sheet engagements and ratio of non-performing loans to total credit proficient to debilitating performance, the Johansen cointegration depicts that minimum capital requirement and banking sector performance are co-integrated. The short run relationship between minimum capital requirement and profit before tax was negative and statistically insignificant while net interest income and minimum capital requirement was positive and significantly correlated. The result also reveals that minimum capital requirement has no significant effect on profit before tax but significantly affects the net interest income of the Nigerian banking sector. The findings of this study show that, for the period reviewed, banking reform has significant effect on financial performance reflected by net interest income but such is not the case for profit before tax of the banking sector. This portrays that increases in indexes of banking reforms has the potential on improving banking sector performance which ultimately results in economic growth and development. There is need for banks’ to improve their assets quality and off balance sheet engagements by advancing loans to productive sectors of the economy rather than seeing oil and gas sector as the only fertile and profitable sector for large loans and advances. Banks’ management should try as much as possible to reducing the ratio of non-performing loan to total credit as this negatively affects performance and increases credit risk associated bad debts

Monetary Policy and Capital Market Performance: An Empirical Evidence from Nigerian Data

This study utilized time series data to determine the effect of monetary policy on the performance of Nigerian capital market. The study was motivated by the inconclusive debate on the real effect of monetary policy on capital market performance. Specifically, this study ascertained the effect of monetary policy rate and cash reserve ratio on the performance of Nigerian capital market surrogated by all share index. Secondary data for the period 1986 to 2016 were collected from the Nigerian Stock Exchange and Central Bank of Nigeria annual reports of various editions. The study applied the Ordinary Least Square (OLS) regression technique and causality analysis in which variations in all share index was regressed on monetary policy rate and cash reserve ratio. The analysis revealed that monetary policy tools have no significant effect on capital market performance. The monetary policy rate has negative significant relationship with capital market performance while cash reserve ratio positively relates with performance of the capital market. Considering the findings emanating from this study, the Central Bank of Nigeria should reduce the current double digit monetary policy to a single digit to attract investments in the capital market. Cash reserve ratio which is currently at 22.5% be lowered to the range: 10%-12% to cause an upsurge in money supply which will in turn improve capital market performance through upward movement in all share index

EFFECT OF THE NIGERIAN CAPITAL MARKET OPERATIONS ON THE LOCAL INVESTMENTS IN NIGERIA

ABSTRACT This paper, examines the effect of the Nigerian capital market operations on the local investments in Nigeria. The main objectives highlighted, is to empirically analyze the effect of the Nigerian capital market operations on local investment. The relevance of the capital in the encouragement of local investment and economic development were highlighted. The paper concludes with recommendation to stem up investors confidence and activities in the capital market so that it could contribute significantly to the growth of local investment in Nigeria

FISCAL DEFICIT IN AN OIL DEPENDENT REVENUE COUNTRY AND SELECTED MACROECONOMIC VARIABLES: A TIME SERIES ANALYSIS FROM NIGERIA (1981-2015)

In this paper, we determine the effect of fiscal deficit on selected macroeconomic variables in Nigeria by specifically evaluating the effect of fiscal deficit on gross domestic product, money supply and inflation. To achieve these objectives, we employed various econometric techniques such as unit root test, Johansen co-integration, granger causality test in which variations in gross domestic product; money supply and inflation were regressed on fiscal deficit and exchange rate using time series data from 1981 to 2015. Secondary data casing the time frame were collected from Central Bank of Nigeria statistical bulletin. The result of the analysis reveals that fiscal deficit has no significant effect on gross domestic product, money supply and inflation in Nigeria. The finding also shows that there is a positive insignificant relationship between fiscal deficit and gross domestic product which measure the growth of an economy at given period of time. This is in line with the Keynesian postulation of the existence of positive relationship between fiscal deficit and macroeconomic variables. Based on the findings, government should allocate and effectively monitor funds sourced as a result of fiscal deficit to providing critical economic infrastructures such as electricity, access road, health, communication among others to reap the benefits associated with fiscal deficit. Monetary policy should be structured in such a way as to compliment fiscal policy so that the level of inflation would be lowered whenever government relies majorly on fiscal deficit as an instrument of fiscal policy