Trade Openness and Output Variability in Nigeria: Implications for EU-ACP Economic Partnership Agreement

Nigeria’s potentials in international trade are hobbled by so many constraints including high cost of doing business; inadequate infrastructure; poorly implemented incentives (fiscal and tariff regimes); massive smuggling; lack of standardization; and unfavorable international trade rules and practices. Nigeria, perhaps with the intention of overcoming these problems, attempted to open up the economy through bilateral free trade arrangements such as AGOA, ECOWAS-CET, and the on-going EU-ACP economic partnership agreement. These arrangements, depending on Nigeria’s offensive and defensive could be vulnerably expose to external shocks. This paper examines the extent to which trade openness affects output volatility as a mirror of the likely implications of free trade arrangement between Nigeria and the EU. EGARCH-M(1,1) multivariate model was used; and the result shows that non-oil revenue and household spending volatility have stabilizing effect, while openness and oil revenue, government spending, exchange rate, private investment volatility and monetary policy rate are pro-cyclical. Keywords: Nigeria, European Union, economic partnership agreement, output volatility, multivariate EGARCH-

The Dynamics of Poverty and Income Distribution: Is The Nigerian Middle Class Statistically Or Economically Growing?

The study attempted to characterize, define and ascertain the dynamics of the Nigerian middle class using the General Household Survey (GHS) of 1996, Nigeria Living Standard Survey (NLSS) of 2004 and the 2009/2010 Harmonized Nigeria Living Standard Survey (HNLSS). Cluster analyses and MLogit model were used to estimate the size and determinants of the middle class respectively. The study among other things shows that middle class is a dynamic and relative concept whose meaning is derived from the economic conditions of a given period. Thus, given the trends in welfare metrics, the present sets of middle class in Nigeria are worse-off relative to the periods 2004 and 1996. Although there is statistical middle class, economically they are living a lie because the macroeconomic fundamentals and other metrics of consumer welfare are not supportive of their existence and sustenance. Keywords: Nigeria, poverty and income distribution, middle class, cluster algorithm, multinomial logi

Determinants of Willingness to Pay for Mobile Telecommunications Services in Nigeria

Notwithstanding the far-reaching contribution of the mobile telecommunications sub-sector in Nigeria’s socioeconomic development, Nigeria is among the countries with the poorest readiness and usage of telecommunications among key economic agents. This study therefore, attempted to ascertain the factors that inhibit consumers access to telecommunications through microeconomic concept of contingent valuation of willingness to pay, using survey data of  5 600 individual consumers. This was estimated with censored Tobit model. The result shows that demand for mobile telecommunications varies considerably with consumers socio-economic factors, while access is limited by network coverage, quality services, interconnectivity, and call tariff.  To ensure that productivity gain in telecommunication are passed to consumers, the paper suggested price cap regulation to determine the maximum allowable price increases for operator’s services as well as interconnectivity charges. It is also important to facilitate consumers’ migration to any network of choice without necessarily changing their existing GSM number. Keywords: Nigeria, Access, mobile telecommunications, contingent valuation, willing to pay, tobit mode

The Impact of Consumer Confidence and Expectation on Consumption in Nigeria: Evidence from Panel Data

The Nigerian economy witnessed a significant growth turning point from the early 2000s after it returned to democratic rule in 1997. But the strong economic growth posted by the country has not served to substantially reduce poverty, inequality, unemployment, exchange rate, inflation and interest rate spread. Consequently, there is a damping effect on consumer confidence, hence low spending. Fixed effect panel model was used to underscore the importance of consumer confidence and expectations in household spending, using data from the CBN survey of consumer expectation across the six geopolitical zones from 2009-2011. The result shows that consumer confidence, current income, income expectation, expected change in the prices of food and durables, and exchange rate are the determinants of consumption in Nigeria. Surprisingly, the short run MPC is substantially larger than the long run MPC, indicative of low savings, perhaps resulting from loss of confidence in interest rate among the households. Keywords: Nigeria, consumer confidence, expectation, macroeconomic variables, household spending, panel dat

Understanding the Predictors of Consumer Sentiments: Lessons for Inflation Targeting Prospects in Nigeria

Given the positive link between consumption and consumer confidence, the study attempted to ascertain factors that predict consumer confidence using quarterly data spanning 2009Q2 to 2012Q1. This is with the objective of providing a policy instrument that will fundamentally link consumer confidence and aggregate demand policies on one hand, and private consumption on the other hand; as well as serve as input into the effort by the Monetary Authorities to transit from intermediate to direct (inflation) targeting regime. A panel model was used for the estimation. We found that a non-volatile exchange rate appreciation and announced exchange rate depreciation, actual and income expectation are positively linked with consumer confidence; while actual and inflation expectation and unemployment have dampening effects. Model of inflation targeting in Nigeria will require that expectation be incorporated in a manner that will attach higher weight to food than durables and actual inflation. Keywords: Nigeria, consumer sentiments, macroeconomic predictors, inflation targeting, panel mode

Revenue Implications of Nigeria’S Tax System

This is a study of the properties of the Nigeria’s tax system particularly the bases of the company income tax, valueadded tax and personal income tax. The results indicate that their bases are not stable (not persistent and volatile).However, while the bases of the company income tax and personal income tax are more sensitive to cyclical swings(current state of the economy over time), that of the value added tax (VAT) is not. The policy implications of thesefindings support the recent government tax policy reform of a shift in focus in the tax system from direct taxation toindirect taxation. With the tax base of VAT being insensitive to the current state of the economy, the revenuetherefrom will not drop sharply when the economy slows down. It will also shield the government from budgetaryshortfalls as it will likely cushion against sharp declines in aggregate tax revenues.Keywords: Tax System, Company Income Tax, Value Added Tax, Personal Income, Tax Policy, Nigeria

Modelling the Long Run Determinants of Foreign Portfolio Investment in Nigeria

This study tries to ascertain the long run determinants of foreign portfolio investment (FPI) in Nigeria such thatappropriate policies will be pursued to attract same in the long run. FPI has grown recently in proportion relative toother types of capital inflows to Nigeria before the wake of global financial crisis. Incidentally, there is no empiricalregularity regarding the determinants of FPI. This study tries to add to the stock of knowledge by modelling thelong-run determinants of FPI in Nigeria over the period of 1981-2010 converted into quarterly series. The variablesconsidered are, market capitalization, real exchange rate, real interest rate, real gross domestic product and tradeopenness. The study applies time series analysis specifically the finite distributed lag model and discovers that FPIhas a positive long-run relationship with market capitalization, and trade openness in Nigeria. Ongoing effortstherefore to sanitize the capital market should be vigorously pursued.Keywords: Nigeria, Foreign Portfolio Investment, macroeconomic variables

Homogenous Economic Policy and Heterogeneous Consumer Economy: Empirical Analysis of the Vulnerability of the Regions to Macroeconomic Policy in Nigeria

This paper provides empirical evidence to show that regimented aggregate demand policy will probably be more appropriate for Nigeria given that the response of consumers to macroeconomic shocks is homogeneously tied around regional demand pattern. Result of the panel regression suggests that the effects of changes in income and price homogenously cut across the six regions, while response to expected rise in unemployment is substantially linked to the predominant employment structure in the regions. Exchange rate is shown to be a weak expenditure-switching instrument of policy variable since it does not have any known consistent pattern of impact. The paper argues for movement away from aggregate to region-specific economic policies based on the demand dynamics of the zones. Keywords: Nigeria, vulnerably, heterogeneous demand, homogenous economic policy, panel mode

Does the End Use of Remittance Matter? - A Macro Simulation of the Nigerian Economy

International remittance has changed the landscape of international migration from brain drain to brain circulation; and provided the developing countries the opportunity to raise alternative sources of consumption and investment financing. However, the tendency that remittances will be poverty-reducing as well as growth-financing depends on its end use, particularly in import-dependent economies. The importance of focusing attention on the use of remittances is to checkmate early signs of another round of potential Dutch Diseases Syndrome which bedeviled the Nigeria’s oil sector from occurring in remittance. Macro-econometric model with six behavioral equations and six identities where used to estimate and simulate the effects of remittances inflow on aggregate demand in Nigeria. The simulation result shows that the much touted poverty-reducing effect of remittances is non-growth-financing for import-dependent country like Nigeria because of its negative impact on current account balance; despite its positive effects on private consumption and investment. Keywords: Nigeria, remittance, consumption, investment, import demand, macroeconometric mode