Foreign Exchange Management and the Nigerian Economic Growth (1960 – 2012). (Review Completed - Accepted)
The study examined foreign exchange management and the Nigeria economic growth from 1970 to 2012. The scope of the study is limited to Nigeria. The empirical model for the study was based on the conclusion of our theoretical framework. The data used for this study were majorly sourced from the Central Bank of Nigeria Bulletin (2011). The ordinary least square estimation techniques within the error correction model (ECM) framework are employed in the study. The choice of the ECM is to enable it account for the explanatory potent of the regressions in both the short run and long run as well as ascertaining the dynamics of attaining long run equilibrium, an issue which is the key to studies related to macroeconomics variables one of which is the exchange rate. The Johansen-Joselius Co- Integration test is employed in this study, to test for the presence of a long run relationship between the dependent variable (exchange rate) and the independent variables. The result of the co-integration as revealed show that trace statistics and maximum Eigen values are greater than the critical values at 5% level of significance. It shows that there is a unique long run relationship among Y, EXCR, EXPT,IMP, INF and FDI. The result further shows that the explanatory variables explain and account for about 99% of variation in economics growth peroxide by GDP, which is an evidence of a good fit of the model. The f-statistics shows that the explanatory variables are jointly significant in explaining economic growth (dependent variable). The result above shows export and foreign direct investment are statistically significant in determining economic growth which considered at 5% and 10% respectively. However, exchange rate import and inflation are found to be statistically non-significant. It is against this back drop of the above findings, that it is recommended that effort be made to increase the consumption of made in Nigeria goods, which includes the usage of raw material that can be sourced locally by Nigerian industries in order to increase foreign exchange earnings. The implication of this is that local industries should be encouraged to look inward for their raw material. Having uncovered from the study that the nexus between economic growth and foreign exchange management being a short run relationship, it is necessary that the foreign exchange management policy initiatives be made to satisfy the shorts–run behavioral expectations of the variables used in uncovering this fact
Keywords: Error Correction Model, Exchange Rate, Foreign Exchange Market, economic growth
IMPACT OF BANK CREDIT ON ECONOMIC GROWTH IN NIGERIA: APPLICATION OF REDUCED VECTOR AUTOREGRESSIVE (VAR) TECHNIQUE (Review Completed - Accepted)
This study investigates the impact of bank credit on economic growth in Nigeria applying the reduced form of vector autoregressive (VAR) technique using time series data from 1960 to 2011. Current gross domestic product (GDP) is the dependent variable and proxy for economic growth while bank credit to the private sector (CPS) to GDP ratio and broad money (M2) to GDP ratio were proxies for financial indicator and financial depth respectively. We tested the stationarity of the variables using the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root tests. All the variables were integrated of order one i.e., I (1). A major finding is that there is a significant positive relationship between bank credit to the private sector, broad money and economic growth. The past values of all the variables were significant in predicting their current values. This result implies that the bank consolidation and recapitalization exercise was a welcome development and further steps should be taken to ensure the stability of the banking sector.
Keywords: Bank credit, Broad money, Vector Autoregression, economic growth
Exchange Rate Fluctuation and Inflation Targeting In an Open Economy: Econometric Approach (Published)
The study empirically evaluates the impact of exchange rate fluctuation on inflation targeting on the Nigerian economy. The study adopted annual times series data spanning a period of 43 years (1970 to 2012). The finding of our results suggests that the theoretical modelling requirements for all the variables used in the regression satisfy the statistical requirements that determine the choice of the statistical model. The result from the estimated long–run model shows that all the variables [interest rate (INTR) and exchange rate (EXCHR)] were statistically significant. The INTR positively influence the growth of INFR in the Nigerian economy while EXCHR negatively impact on the economy. Therefore, more concerted effort should employed by the federal government to stabilize the exchange rate as this will in turn lead to a positive impact of EXCHR on the economy. This will boost the country’s export as well as reduce import their by reduction inflation in the economy. In the light of the foregoing, we state that the financial sector does not operate in ambiance but in a macroeconomic environment. It is therefore necessary that the environment should be one that is amenable to contemporary market situations. We therefore recommend that in order to curb inflation through inflation targeting, efforts must be made towards gathering financial data at a more precise level such that majority of financial transactions is captured in the database. Also, lending rates in Nigeria should be made flexible while other means should be employed towards raising the value of the naira as this will reduce greatly the inflation rate in the country.
Keywords: Exchange Rate Volatility, Inflation Targeting, Open Economy, economic growth