FACULTY OF THE SOCIAL SCIENCES
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Item Policy Trilemma and Interest Rate Behaviour in Nigeria(Statistics Department, Central Bank of Nigeria (CBN), 2018) Ajogebeje, K.; Adeniyi, O. A.; Egwaikhide, F. O.Policy makers face trade-off in dealing with exchange rate management, monetary independence and concerns about capital mobility simultaneously. This study empirically examines the effects of Nigeria's trilemma policy path on interest rate using data spanning from 1997:Q1 to 2017:Q3. It equally in- corporates the role of external reserves in buffering these effects. Stationarity of the series were ascertained with Zivot-Andrew (ZA) structural break unit roots test technique, while the bounds test cointegration approach was used to confirm the cointegrating properties of the variables. We found that capital mobility has significant effect on interest rate in the long run base- line model and could also be successfully buffered with external reserves to reduce interest rate. Additionally, our results show that although exchange rate stability and monetary independence do not independently affect inter- est rate, but their interaction with external reserves does. This implies that external reserve serves as an effective buffer if appropriately employed by the monetary authorities. The trilemma policy can be used to optimally reduce interest rate. Also, external reserves could serve as a tool for economic stabilization with appropriate combination with other relevant policy variables.Item Empirical Analysis of the Oil Shocks-Stock Returns Relationship: A Sectoral Disaggregation for Nigeria(West African Institue of Financial Economic Managemnt, 2018) Kumeka, T.; Adeniyi, O. A.; Orekoya, S. O.This paper investigated the impact of crude oil price shocks on the returns and volatility of the Nigerian stock market. Since not all industries are expected to be equally affected by oil price changes, we conducted our study at the disaggregate firm level for two sectors namely Banking and Oil &Gas. A bivariate VAR-GARCH model was employed for the daily observations of Brent crude oil price and the closing share values of the 12 firms over the period January 1, 2000 to December 31, 2015. The empirical findings showed that the returns on stock market are significantly affected by their own past values suggesting some evidence of short-term predictability in stock market changes. For the Banking sector past oil shocks drive stock price volatility in all firms, except for ACCESS Bank. The response of stock returns to oil impact is negative in the case of FIRST Bank, UBA and WEMA Bank and positive for GUARANTY Trust Bank, UNION Bank and ACCESS Bank. In the Oil & Gas sector on the other hand, we found that innovations in the oil market had effects on the stock volatility in three firms (BOCGAS, CONOIL and OANDO). The largest response to oil effects was observed in the case of CONOIL followed by BOCGAS. Overall, our findings showed that direct volatility transmission is insignificant for each pair of oil firms, because the volatility transmission runs more often from oil market to firms than from the firms to oil market. Considering the intensity of volatility spillover, it seems to vary from sector to sector, depending especially on their degree of oil dependence and industrial characteristics. The impact has a direct link in the Oil & Gas sector, while in the Banking sector the impact is indirectly linked. This suggests that investors should closely watch the happenings in the oil market to have better forecasts of stock market volatility and make appropriate investment decisions.Item Financial Liberalisation and Small Medium Scale Enterprises Growth in Nigeria(West African Monetary Institute (WAMI), 2016) Usuah, E.; Odozi, J.; Adeniyi, O.A.This paper examined the relationship between financial liberalization and the growth of Small and Medium Scale Enterprises (SMEs) in Nigeria controlling for some other key macroeconomic variables such as investment, inflation and the domestic national output (GDP). Using annual data covering the period 1981-2012, we estimated the effect of the macroeconomic variables on the growth of SMEs. An index which measured the gradual progression and institutional changes involved in financial liberalization was constructed for this study. A number of interesting results were obtained. First, unlike previous studies which concluded that financial liberalization leads to a reduction in financing constraint of SMEs thereby leading to their growth; our results showed that financial liberalization had negative though non-significant effect on the growth of SMEs in Nigeria. Second, the results also showed that inflation had a positive and significant effect on the growth of SMEs in Nigeria. Investment had a positive though non-significant effect on the growth of SMEs in Nigeria. Finally, GDP had a large negative but significant effect on the growth of SMEs. On the basis of the result obtained from the study, government policies towards further liberalization of the financial sector of the country might not lead to an increase in the growth of SMEs given the existence of a negative relationship between SMEs growth and financial liberalization.Item Financial Development and Economic Growth in Nigeria: Evidence from Threshold Modelling(Elsevier Ltd, 2015) Adeniyi, O. A.; Oyinlola, M. A.; Omisakin, O.; Egwaikhide, F. O.This paper re-examined the relationship between financial development and economic growth in Nigeria. Unlike existing studies, we attempted to assess the information content of non-linearities in the finance–growth nexus for Nigeria. We also attempted to inventively gauge the impact of financial reforms on the Nigerian economy particularly in terms of economic growth. Using annual data covering the period 1960–2010, we factored in threshold effects through the financial development (FD) measures. Following these, we unearth a number of interesting results. First, financial development negatively impacted growth but a sign reversal resulted on accounting for threshold-type effects. This is indicative of some turning points in the finance–growth association. Second, using a composite index of FD led to a similar outcome. Third, on the heels of sample splitting, the coefficients for the pre- and post-reform era are hardly distinguishable casting doubt on the efficacy of financial system reforms. On the basis of the foregoing, broader structural reforms should pervade Nigeria’s policy space if the aim of sustained, inclusive and employment-generating growth is to be realized.Item Trade and Consumption of Energy Varieties: Empirical Analysis of Selected West Africa Economies(Elsevier Ltd, 2015) Adewuyi, A. O.; Adeniyi, O. A.This paper examined the relationship between consumption of energy varieties (total, electricity and road transport) and trade (export and import) in selected West African countries. Data spanning 1971 to 2010 was used to estimate vector error correction models (VECM) for 6 countries based on data availability. Empirical analysis showed that there is insignificant linkage between consumption of energy varieties and export of Benin. However, there is a one-way positive linkage running from energy varieties to import of the country. For Cote d'Ivoire, energy varieties have insignificant relationship with export and import. However, while inverse relationship runs from export to both electricity and road transport energy consumption positive (direct) association runs from import to total energy and transport energy consumption. With respect to Ghana, positive causality runs from electricity and road transport energy consumption to export. However, there is a significant positive feedback effect between import and electricity as well as road transport energy consumption. For Nigeria, there is a significant positive link running from both electricity and road transport energy consumption to export and import. Senegal's case suggests a bi-directional inverse linkage between export and total energy consumption. For Togo, both export and import are insignificantly linked with energy use. These mixed findings generate different policy implications across the selected West African countries, which are well articulated in the paper.Item Structural Breaks and the Finance-Growth Hypothesis in ECOWAS: Further Empirical Evidence(Eastern Macedonia and Thrace Institute of Technology, 2014) Omisakin, O.; Adeniyi, O. A.This study makes a cross sectional case in investigating the validity, or otherwise, of the finance driven growth hypothesis in the ECOWAS countries using annual data from 1970 to 2008 for seven countries namely: Burkina Faso, Cote d’Ivoire, The Gambia, Ghana, Nigeria, Senegal and Togo. In contrast to earlier studies on developing countries, this study specifically tests for the possibility of structural breaks/regime shifts in the finance-growth long run relationship by employing the Gregory and Hansen (1996) residual based test which accounts for endogenous structural break. While the Gregory-Hansen structural break cointegration result confirms the existence of cointegration relationships among the selected countries despite the breakpoints, the Granger-causality test result indicates a general pattern of causality running from financial development to economic growth in most of the countries. Also, the striking feature of the result of our estimated growth model generally lends credent to the importance of financial development in explaining growth dynamics among the selected countries, thus reinforcing the finance-driven growth hypothesis.Item An Empirical Re-examination of Exchange Rate-Trade Balance Nexus in Nigeria(African Journal Online (AJOL), 2013) Oyinlola, M. A.; Omisakin, O.; Adeniyi, O. A.The Nigerian exchange rate-trade balance nexus was re-examined. The long run relationship between these variables was explored using the Gregory-Hansen cointegration approach on a data sample between 1980:Q1 and 2010:Q4. Prior to this, three efficient integration tests that can overcome potentially severe finite sample power and size problems suffered by the standard methods were tactfully pursued for robustness. The short run impact analysis was done in the error correction framework. The analyses showed that exchange rate depreciation led to trade balance deterioration in both the short run and the long run. Thus, this study could not find support for J-curve in Nigeria. Some suggestions on the way forward were put forth.Item The Dynamics of Stock Prices and Exchange Rate: Evidence from Nigeria(West African Monetary Institute, 2012) Oyinlola, M. A.; Adeniyi, O. A.; Omisakin, O.This paper probed the long-run and short-run dynamics between stock prices and exchange rates in Nigeria using the Johansen and Gregory-Hansen cointegration analyses, causality test and Exponentional General Autoregressive Conditional Heteroskedasticity modeling on daily data from January 2, 2002 to August 11, 2011.The results showed that there is no long run relationship between stock prices and exchange rate in Nigeria, albeit, with a structural break date of mid April 2007, which coincides with the period when the stock prices plumped precipitously from the impact of global financial crisis in early 2007. In addition, the results indicated that there is a unidirectional relationship from stock prices to exchange rate and that the EGARCH modeling suggested that a 100% increase in stock prices would lead to a 1.66% appreciation of the exchange rate. Thus, it is imperative for monetary authorities in Nigeria to take into account the role of stock market development in the conduct of its exchange rate policy.Item Oil Price Shocks and Economic Growth in Nigeria: Are Thresholds important?(John Wiley & Sons Inc., 2011) Adeniyi, O.A; Omisakin, O. A.; Oyinlola, M. A.The impact of oil price shocks on the economy has occupied the attention of researchers for almost four decades. Majority of studies support the existence of a negative association, while some recent evidences seem to have popularised the view that outcomes are the artefacts of misspecified functional forms. This study, although similar in spirit to this popular opinion, is, however, distinct in a number of ways. Firstly, unlike most Nigeria-specific studies, this paper explores alternative measures of oil price shocks, which have been developed and used in the literature with a view to ascertaining the extent to which conclusions about the oil price-growth association depend on the definition of shocks adopted. More importantly, this, to the best of our knowledge, is a pioneer attempt at introducing threshold effects into the linkage between oil price shocks and output growth in Nigeria. The relatively recent regime-dependent multivariate threshold autoregressive model, together with the characteristic impulse response functions and forecast error variance decomposition, is adopted in this study. Using quarterly data spanning 1985–2008, a non-linear model of oil price shocks and economic growth is estimated. Our main results indicate that oil price shocks do not account for a significant proportion of Observed movements in macroeconomic aggregates. This pattern persists despite the introduction of threshold effects. This implied the enclave nature of Nigeria’s oil sector with weak linkages. Therefore, the need to spend oil revenue productively is imperative if favourable effect on real output growth is envisaged.Item Saving-Investment Nexus in Developing Countries: Does Financial Development Matter?(Emerald Publishing Limited, 2013) Adeniyi, O. A.; Egwaikhide, F. O.The Feldstein-Horioka puzzle is re-examined using a sample of 20 sub-Saharan Africa (SSA) countries. Unlike the extant literature we demonstrate the expediency of sustenance of financial sector reforms for the saving-investment nexus in SSA. Findings showed saving retention coefficients similar in magnitude to those already reported for developing countries, particularly SSA. In addition, however, the results uncovered a telling intervening role for financial deepening in the saving-investment space. Going forward, the precise nature and corresponding policy implications of this role should form an integral part of discussions in both academic and policy circles.