Size and Causes of the Informal Sector of the Nigerian Economy: Evidence From Error Correction Mimic Model

This work was motivated mainly by the need to empirically examine the magnitude of economic loss attributed to informality in Nigeria. Specifically, the objective of the study is to examine the size, development, and causes of the informal sector of the Nigerian economy. In recent times, multiple indicators multiple causes (MIMIC) models are applied to time series estimating the size and development of the informal economy for a particular country. However, in order to obtain more accurate estimates about the size, development and causes of the informal economy in Nigeria, this work applied an error correction MIMIC (EMIMIC) model which estimates the cointegration equilibrium relationship and the error correction short run dynamics. The results show that since 1970, the size of the informal economy has hovered between 53.6 – 77.2% of GDP, and that the average size of the informal economy was about 64.6% of GDP. Specifically, the results indicate that informal sector was about three-quarters of GDP in 2010. Furthermore, the results show that unemployment, tax burden, government regulation, and inflation are the most important drivers of informality in Nigeria. Key words: Informal Sector, Nigerian Economy, Cointegration, Error Correction, MIMIC Mode

Informality and Bank Performance in Nigeria: A Panel Data Analysis

The informal sector in Nigeria is one of the major components of the overall economy, which is capable of starving the banking system of the deposits needed for investment purposes. This study empirically examined the impact of informality on the performance of the banking industry in Nigeria. The results indicate that if bank performance is measured by profit after tax (PAT) or return on assets (ROA), then informality impacts negatively on the performance of deposit money banks in Nigeria. Other variables that impact negatively on bank performance are inflation rate and asset quality (measured as the ratio of total non-performing loans to total loans). Based on these findings, the study recommends that deposit money banks in Nigeria should pursue policies and products that will assist them to capture the huge economic activities taking place in the informal sector, while the government (that is the Central Bank of Nigeria, CBN) should also reconsider its policies that are capable of driving economic units underground. The study concludes that deposit money banks in Nigeria must work together with the CBN to achieve an all inclusive banking system, thereby reducing the negative impact of informality on the performance of deposit money banks in Nigeria. Key words: Informality; Bank Performance; Panel Analysis; Return on Asset; Profit After Ta

Determinants of Stock Price Movements in Nigeria: Evidence from Monetary Variables

Most studies conducted on the determinants of stock price movements in Nigeria have been done on theoretical basis with no quantitative empirical evidence to support their postulations. Consequently, this study examined the macroeconomic determinants of stock price movements in Nigeria using detailed econometric framework in order to provide the foundation for evidence-based policies. Both the long-run and short run dynamic relationships between the stock price movement and the macroeconomic variables were analyzed with time series data that spanned from 1985 to 2010 using the Engle-Granger two-step cointegration test. We established that there is no cointegration between the variables, indicating the absence of long run relationship. Results of the regression indicate that the monetary policy variables (real exchange rate, real interest rate and money supply) as well as political instability are not the determinants of stock price movements in Nigeria; however, inflation was found to be a major determinant of stock price movements. The study recommends that the monetary authorities (that is the Central Bank of Nigeria, CBN) and policy makers should pay attention to changes in money supply and inflation in view of their sensitivity to stock price movements in Nigeria. Key words: Stock Price Movement; Monetary Policy Variables; Cointegration; Inflation, CBN; Nigeri

Small Scale Enterprises, Poverty Alleviation and Job Creation in Nigeria: Lessons from Burnt Bricklayers in Benue State

This empirical study examined the efficacy of tackling the twin economic challenges of poverty and unemployment in Nigeria through the small scale enterprise commonly known as burnt bricklaying. The study also examined the socio-economic characteristics of the bricklayers as well as the major challenges militating against their growth and performance. The results indicate that burnt bricklaying has significant positive impact on poverty alleviation, job creation, and income generation in Nigeria. The study therefore recommends that the challenges of poor infrastructure, low prices of bricks, low demand for bricks, and low operating capital faced by these small scale enterprises should be addressed by the various tiers of government and the financial system as a viable means of job creation, poverty alleviation and income generation in Nigeria. Keywords: Small Scale Enterprises; Poverty Alleviation; Job Creation; Unemployment; Bricklayin

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

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