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ECOWAS MACROECONOMIC CONVERGENCE REPORT FOR 2022

In accordance with the Protocol Establishing WAMA (Decision A/Dec. 4/7/92 of the Authority of Heads of State and Government) in its Articles 3, 4, and 9 and the provisions of Supplementary Act A/SA.01/12/15 amending Decision No. A/DEC.03/06/12 on the Macroeconomic Convergence and Stability Pact (MCSP) among the ECOWAS Member States, this report assesses the macroeconomic performance and the status of convergence of ECOWAS Member States in 2022 and prospects for 2023. It proposes key policy recommendations to Member States, focusing mainly on the actions to be taken to improve their macroeconomic performance.

URBANISATION, FOREIGN DIRECT INVESTMENT AND UNEMPLOYMENT IN NIGERIA

ABSTRACT
The study examines the effects of urbanization and FDI on unemployment in
Nigeria during the period from 1981 to 2019 using the ARDL approach to
cointegration and error correction analysis. It finds inter alia that urbanization
plays significant role in reducing unemployment in the country in the short-run
and long-run. FDI is found to exacerbate the unemployment problem in both
time horizons, while domestic investment attenuates it. Based on the findings,
the paper recommends among others, rapid urban development and expansion,
and implementation of policies and programmes targeted at encouraging
domestic investment, as some measures to curtail unemployment in the country.
Keywords: Urbanisation, Rural-Urban Migration, Foreign Direct Investment,
Unemployment, Employment.
JEL Classification Codes: E24, F21, P25

Oziengbe Scott AIGHEYISI

SMALL AND MEDIUM ENTERPRISES AND GLOBAL VALUE CHAINS PARTICIPATION: EVIDENCE FROM NIGERIA

ABSTRACT
The study seeks to investigate factors that influence SMEs participation in
Global Value Chains (GVCs) with focus on innovation and firms’ characteristics.
The World Bank Enterprise Survey data set which comprises 2676 firms was
used. The Probit Model was employed to ascertain how the combination of
private and foreign ownership, private ownership only and foreign ownership
only would contribute to GVCs. The marginal effect explains the probability of
these variables contributing to GVCs. The results suggest that the private sector
participates more in GVCs, and that the size is significant with employees of
more than 100. The study finds that hotel and restaurant sector participated more
in GVCs compared to others. It further finds that the participation of Nigerian
SMEs in GVCs is quite different from what obtains elsewhere. The study finds
that the size of SMEs is important; but that it is common in private ownership
that invests in hotel/restaurant sector which render services in GVCs.
Keywords: Trade, SMEs, Global value chain, Nigeria.
JEL Classification: F14, F15, H32, L22.
Acknowledgement: We are highly indebted to two anonymous expert reviewers
for their comments on earlier drafts of the paper. All errors remain those of the
authors

Jude Okechukwu Chukwu
Bob O. Ugwejeh
Chimere O. Iheonu

PUBLIC DOMESTIC DEBT AND INTEREST RATE IN NIGERIA: AN ARDL BOUNDS TEST ANALYSIS

ABSTRACT
The paper investigated the relationship between public domestic debt and
interest rate in Nigeria using data from 1981Q1 to 2018Q4. Applying the
Autoregressive Distributed Lag (ARDL) bound test, we confirmed the existence
of a long run relationship among the model variables; namely interest rate,
domestic debt, money supply and capital inflows. The results affirm the positive
and significant effect of domestic debt on interest rate in Nigeria. Therefore,
managing the growth of domestic debt is pertinent in moderating the high
interest rate The empirical impact of money supply on interest rate was found to
be in line with theoretical expectation. However, the variable of foreign capital
inflow was found to be positively related to interest rate against expectation.
This imples that the inflows have not been large enough to make a dent on
market interest rates. The error correction term was found to be significant and
indicating that 16.4 per cent of the disequilibrium will be dissipated before the
next period, which, in order words is the speed at which the interest rate will
return to its long-run equilibrium following changes in domestic debt, money
supply and foreign capital inflow in the short-run. The paper concludes that
given the significant effect of public domestic debt on market interest rate,
continuous borrowing from the domestic market by government would have the
adverse effect of keeping interest rate high, which can be a disncentive to private
investment. The paper also suggest the optimisation of heterodox approach in
managing liquidity to influence interest rate downward, given the significance
of money supply, with eye on price stability.
Key words: Interest rate, Public Domestic debt, Capital Inflows, ARDL
JEL classification: C51, E43, E62, H63

Yusuf, Dauda Bulus

OIL PRICE AND STOCK PRICES VOLATILITY TRANSMISSION IN NIGERIA

ABSTRACT
The study investigates the relationship between oil price (OP), oil price volatility
(OPV) and stock price volatility (SPV) in Nigeria, using an Autoregressive
Distributed Lag (ARDL) model, Toda-Yamamoto-Dolado-Lutkepohl (TYDL)
test, and Breitung-Candelon Frequency Domain Causality Test. The study
shows that OP causes the SPV and OPV in a one-way direction in the long run.
However, there was evidence of a bi-directional relationship with SPV in the
medium run. It also shows that the OPV and SPV positively impact OP in the
short and long run. Overall, the study found a greater tendency for oil prices
to adjust back to their long-run equilibrium when affected by stock market
prices. Therefore, it recommends that policymakers consider the movement in
oil price and stock price in shaping the capital market’s operation and ensuring
the proceeds from increased oil prices are utilised maximally for economic
revitalisation in Nigeria.
Keywords: Oil Price, Oil Price Volatility, Stock Price Volatility, ARDL, Bound
test, Toda-Yamamoto Causality test
JEL: E3, G17, C5

Sesan Oluseyi Adeniji
Kamaldeen Ajala
Musa Abdullahi Sakanko

GROWTH AMIDST GROWING TRADE DEFICITS; THE AFRICA EXPERIENCE

ABSTRACT
Against the backdrop of the quest for increase trade among countries owing to
the fact that gains from trade could serve as a boost for sustainable growth and
development, this study examined the relationship and impact trade deficit has
on economic growth in Africa (comprising forty-two Africa countries) for the
period 1996 to 2018. DOLS estimation technique was employed and it was found
that trade deficit negatively and significantly impacted on growth in Africa. This
was also affirmed by a robustness check using FMOLS estimation technique.
Variance inflation factors analysis was conducted and it was founded that there
exists no serious multicollinearity amongst the variable while granger causality
test revealed a bi-directional causality between trade deficit and growth. The
implication emanating from the analysis is that the benefits of international
trade to Africa countries is constrain by the incessant growing trade deficit. In
the light of the findings recommendations such as increase in local production
base and the promotion of policies that encourage the utilization of local input
for both consumption and production purposes were proffered. Others includes;
trade re- negotiations with institutions such as AfDB, WTO and IMF aimed at
curtailing the burden of trade deficit in Africa and that Africa countries should
indulge more in intra Africa trade for more resources to be held within the
continent especially in light of the implementation of AfCFTA agreement.
Keywords: Trade, economic growth, Time series analysis, Developing country
JEL: F11, F43, C32, N17

Izevbigie, Norense John (PhD)1
Abusomwan Osamede Success (PhD)
Ighodaro Atewe Clement (PhD)

ASYMMETRIC SHOCKS AND FEASIBILITY OF A WEST AFRICAN MONETARY UNION: SVAR AND S-SVAR APPROACH

ABSTRACT
Asymmetric shocks are crucial and constitute the requisite conditions for an
optimum currency area. This study employed the structural vector autoregressive
(SVAR) model to identify the predominant shocks affecting ECOWAS countries
and further analysed the dynamic evolution of the predominant shocks using the
State-Space VAR (S-SVAR) model on secondary data from 1975 to 2015. The
SVAR reveals that the global GDP and monetary shocks predominantly affect
ECOWAS Countries. The S- SVAR results clearly indicate that the identified
shocks are asymmetric and oscillate irregularly after a time lag of one year.
Also, the convergence after unexpected macroeconomic disturbances (shocks)
takes longer periods with different time paths, and with some countries finding
it difficult to converge even in the long run. Thus, the envisaged West African
Monetary Union is not feasible. ECOWAS members should be given ample time
for them to satisfy the requisite conditions of an optimal currency area and
their policies need to be timely and quick to respond to shocks before they start
manifesting.
Keywords: Asymmetric shocks, Mmonetary Uunion, Ooptimal Currency Area,
SVAR, S- SVAR
JEL Classification: F49, F33, F45, C15, C55

Louis Sevitenyi Nkwatoh

ECOWAS MACROECONOMIC CONVERGENCE REPORT FOR 2021

As part of monitoring, coordinating and implementing the ECOWAS Monetary Cooperation Programme (EMCP), WAMA publishes the annual Macroeconomic Convergence Report after biannual multilateral surveillance missions. The report reviews the state of convergence within the ECOWAS region in 2021, as well as the prospects, as required under the protocol for the creation of the Agency in […]