Estimating bull and bear betas for the Nigerian stock market using logistic smooth threshold model

In this paper, we examine the Nigerian stock market sector returns and estimate the bull and bear betas using the Logistic Smooth Threshold Market (LSTM) model. The LSTM model specification follows from the linear Constant Risk Market (CRM) model. We estimate the LSTM model for the overall sampled daily time series from 2001 to 2012 using the conditional nonlinear least squares approach. We also estimate the model for each of the All share Index (ASI) sub-samples taking the time of financial crisis (February 2008) as the break point. The results show the significant correlations of stocks returns in each market industry with ASI. Nonlinear LSTM dynamics are found to be significant, with significant bull and bear betas in the overall and each of the sub-samples. We find in particular, that the Petroleum, Finance, and Food and Beverages sector equities to be of higher investment risk within the study period

A Text Mining Analysis of Central Bank Monetary Policy Communication in Nigeria

This paper employs text-mining techniques to analyse the communication strategy of the Central Bank of Nigeria (CBN) during the period 2004-2019. Since the policy communique released after each meeting of the CBN’s monetary policy committee (MPC) represents an important tool of central bank communication, we construct a corpus based on 87 policy communiques with a total of 123, 353 words. Having processed the textual data into a form suitable for analysis, we examined the readability, sentiments, and topics of the policy documents. While the CBN’s communication has increased substantially over the years, implying increased monetary policy transparency; the computed Coleman and Liau readability index shows that the word and sentence structures of the policy communiques have become more complex, thus reducing its readability. In terms of monetary policy sentiments, we find an average net score of -10.5 per cent, reflecting the level of policy uncertainties faced by the MPC over the sample period. In addition, our results indicate that the topics driving the linguistic contents of the communiques were influenced by the Bank’s policy objectives as well as the nature of shocks hitting the economy per period

Destination sectors and originating economies of Nigeria's private foreign assets and liabilities in 2012

The 2013 survey of foreign assets and liabilities of enterprises in Nigeria was conducted to determine destination sectors of foreign private capital flows and economies where such investments originate. The survey covered 649 large establishments in Nigeria with 87.4 per cent response rate. The cross border transactions/investments of the respondents during 2011 and 2012 indicate total foreign claims on the Nigerian economy as at end 2012 rising to N16, 790.78 billion from N13, 647.19 billion recorded in 2011. Of this total, 98.1per cent came in the form of direct investments, while portfolio investments and other capital flows accounted for 1.1 and 0.8 per cent, respectively. About 39 per cent of the total inflow originated from Europe, while 16.7 per cent and 16.3 per cent originated from the Middle East and North America, respectively. A breakdown in terms of destination sectors revealed that extractive industries sector attracted 40.5 per cent and is followed by manufacturing, which received 27.7 per cent. Total stock of outward investment as at end 2012 was N235.94 billion as against N208.44 billion recorded in 2011. In 2012, outward direct investment dominated with 76.5 per cent of the total, while European countries were the preferred investment destination for Nigerian enterprises receiving 57.4 per cent of the total outflow, followed by Africa (27.2 per cent)

Survey of foreign assets and liabilities in Nigeria 2011 report

The 2011 survey of foreign assets and liabilities (SOFAL) of enterprises in Nigeria was conducted in June/July 2012 by the Statistics Department of the Central Bank of Nigeria (CBN) in conjunction with the Nigerian Export Processing Zone Authority, Nigerian Investment Promotion Commission and other collaborating agencies. The survey covered large establishments numbering 320 across the country. A total of 275 completed questionnaires were retrieved and analyzed indicating a response rate of 85.9 per cent. The survey instrument was designed to capture cross border transactions/investments of the respondents during 2010 and 2011. Available data from survey returns showed that total foreign claims on the Nigerian economy (liabilities) as at end 2011 rose to N12,729.69 billion from N11,681.32 billion recorded in 2010. A breakdown of the figures showed that 74.8 per cent came in the form of direct investment, while portfolio investment and other capital flows accounted for 10.3 and 14.9 per cent, respectively. The European Union countries accounted for 54.9 per cent of the total inflow, and are followed by other Africa countries with 15.8 per cent. A breakdown in terms of recipient sectors of inward capital flows to Nigeria revealed that the extractive industries sector ranked highest with 49.4 per cent and is followed by manufacturing, which received 29.1 per cent. Total stock of outward investment as at end 2011 was N2,377.03 billion as against N2,500.14 in 2010. In 2011, Outward direct investment dominated with 84.1 per cent of the total, while Africa countries were the preferred investment destination for Nigerian enterprises receiving 93.3 per cent of the total outflow mostly by the Nigeria's banking industry. The survey also indicated a decline in investment flow to the economic free zones around the country

Economic policy uncertainty index for Nigeria

We construct an index of economic policy uncertainty (EPU) for Nigeria following the news-based approach developed by Baker et al. (2016). The index is based on news articles published by five Nigerian newspapers over the period April 2016 – June 2023.The computed index tracks major events in the country, increasing during periods of higher uncertainties around key economic and political developments. For instance, the economic recession of 2016, the COVID-19 pandemic, and the country’s election cycles were associated with higher levels of the index. The computed index is useful for economic and policy analyses

Investigating Predictors of Inflation in Nigeria: BMA and WALS Techniques

The recent economic conundrum arising from the fall in the international oil price has threatened the maintenance of price stability, a key function of the central bank, therefore the need to investigate predictors of inflationary measures arises. The model averaging method considers uncertainty as part of the model selection, and include information from all candidate models. We analysed a wide spectrum of inflation predictors and all the possible models for Nigeria CPI inflation using the Bayesian Model Averaging and Weighted Average Least Squares. The study uses fifty-nine (59) predictor variables cutting across all sectors of the Nigerian economy and three (3) measures of inflation, namely; all items consumer price index, core consumer price index and food consumer price index. The results from both model averaging techniques showed that maximum lending rate, world food price index and Bureau de change exchange rate are the significant drivers of inflationary measures among focus variables, while foreign assets, credit to private sectors, net credit to government and real effective exchange rate are the drivers of inflationary measures, for the auxiliary variables, strongly supporting the monetarist and open economy views on inflation. The structuralist view is reported to be relatively weaker because government expenditure is only significant at 10.0 per cent.

Investigating Predictors of Inflation in Nigeria: BMA and WALS Techniques

The recent economic conundrum arising from the fall in the international oil price has threatened the maintenance of price stability, a key function of the central bank, therefore the need to investigate predictors of inflationary measures arises. The model averaging method considers uncertainty as part of the model selection, and include information from all candidate models. We analysed a wide spectrum of inflation predictors and all the possible models for Nigeria CPI inflation using the Bayesian Model Averaging and Weighted Average Least Squares. The study uses fifty-nine (59) predictor variables cutting across all sectors of the Nigerian economy and three (3) measures of inflation, namely; all items consumer price index, core consumer price index and food consumer price index. The results from both model averaging techniques showed that maximum lending rate, world food price index and Bureau de change exchange rate are the significant drivers of inflationary measures among focus variables, while foreign assets, credit to private sectors, net credit to government and real effective exchange rate are the drivers of inflationary measures, for the auxiliary variables, strongly supporting the monetarist and open economy views on inflation. The structuralist view is reported to be relatively weaker because government expenditure is only significant at 10.0 per cent.

Forecasting Nigerian Inflation using Model Averaging methods: Modelling Frameworks to Central Banks

As a result of the adverse macroeconomic effect of inflation on welfare, fiscal budgeting, trade performance, international competitiveness and the whole economy, inflation still remains a subject of utmost concern and interest to policy makers. The traditional Philips curve as well as other methodologies have been criticized for their inability to track correctly the pattern of inflation, particularly, these models do not allow for enough variables to be included as part of the regressors, and judgment is often made by a single model. In this work, model averaging techniques via Bayesian and frequentist approach were considered. Specifically, we considered the Bayesian model averaging (BMA) and Frequentist model averaging (FMA) techniques to model and forecast future path of CPI inflation in Nigeria using a wide range of variables. The results indicated that both in-sample and out-of-sample forecasts were highly reliable, judging from the various forecast performance criteria. Various policy scenarios conducted were highly fascinating both from the theoretical perspective and the prevailing economic situation in the country

Forecasting Nigerian Inflation using Model Averaging methods: Modelling Frameworks to Central Banks

As a result of the adverse macroeconomic effect of inflation on welfare, fiscal budgeting, trade performance, international competitiveness and the whole economy, inflation still remains a subject of utmost concern and interest to policy makers. The traditional Philips curve as well as other methodologies have been criticized for their inability to track correctly the pattern of inflation, particularly, these models do not allow for enough variables to be included as part of the regressors, and judgment is often made by a single model. In this work, model averaging techniques via Bayesian and frequentist approach were considered. Specifically, we considered the Bayesian model averaging (BMA) and Frequentist model averaging (FMA) techniques to model and forecast future path of CPI inflation in Nigeria using a wide range of variables. The results indicated that both in-sample and out-of-sample forecasts were highly reliable, judging from the various forecast performance criteria. Various policy scenarios conducted were highly fascinating both from the theoretical perspective and the prevailing economic situation in the country

Economic policy uncertainty index for Nigeria

We construct an index of economic policy uncertainty (EPU) for Nigeria following the news-based approach developed by Baker et al. (2016). The index is based on news articles published by five Nigerian newspapers over the period May 2009 – June 2023.The computed index tracks major events in the country, increasing during periods of higher uncertainties around key economic and political developments. For instance, the terrorist activities of 2011, negative oil price shocks of 2014, the economic recession of 2016, the COVID-19 pandemic, and the country’s election cycles were associated with higher levels of the index. The computed index is useful for economic and policy analyses