As part of monitoring, coordinating and implementing the ECOWAS Monetary Cooperation Program (EMCP), the West African Monetary Agency (WAMA) publishes an annual Macroeconomic Convergence Report after biannual multilateral surveillance missions. The report reviews the macroeconomic status within the ECOWAS region, as well as the prospects, in accordance with the protocol for the creation of the […]
Norense John IZEVBIGIE and Nosakhare Liberty Arodoye (MINES)
Abstract
This study examined the nexus between information communication technology, tax revenue mobilsation and economic performance between 1981 and 2017 in Nigeria. VECM showed bi-directional relationship between information communication technology, tax revenue mobilization and economic performance in Nigeria. The speed of adjustment of government expenditure was slow while that of tax revenue was high. FEVD revealed shock variations among variables with more of the variations accounted for by ‘own shocks’. The study also found negative relationships between information communication technology and tax revenue mobilization as well as a negative relationship between tax revenue and economic performance in Nigeria. However, a positive relationship between information communication technology and the Nigeria economy was established with VECM stability test pointing to the fact the model is relatively stable. As such, recommendations were proffered.
Keywords: Technology, Tax, Economy Performance, Nigeria
JEL Classification: O30, H21, O11, O55
JOSHUA ROTIMI AND UFFIA, EDISON JAMES
Abstract
The study investigates the link between natural resource dependence and economic growth in Nigeria, employing the Autoregressive Distributed Lag framework on data from 1981 to 2017. The ARDL result indicated that the coefficients of natural resource dependence was positive but was not statistically significant at the 5% level of significant in the short run but was statistically significant in the long run. This finding negates the Structuralist consensus that natural resource dependent impact negatively on economic growth. Oil price was found positive and statistically significant. This means that oil price is an important growth determinant in Nigeria. Exchange rate and foreign direct investment were both positive and statistically significant while physical capital and domestic investment though positive but was not statistically significant. The study recommends deliberate effort at diversifying the economy from dependence on single natural resource to stall transmission of oil price shocks into the domestic economy; maintain stable exchange rate; and provide enabling business environment towards attraction of more inflows of FDI into Nigeria.
Keywords: Natural Resource Dependence, Oil Price, Economic Growth, Autoregressive Distributed Lag
George Okorie and Godwin C. Okpara
Abstract
The study estimated a model of the relation between financial development and economic growth in the countries of the West African Monetary Zone (WAMZ). Three measures of financial development are used to construct a financial development index FINDEP by means of principal component analysis. The results suggest the existence of a unidirectional causality from financial development to economic growth. The study further examines the long run relationship between RGDP and the composite index of financial sector development using the Johansen Fisher Panel Cointegration tests. The results suggest that the composite variable of financial development have significant long run relationship with RGDP. The paper estimated and presented results for the pooled mean group (PMG), and mean group (MG) models for the regression, as well as the hausman h-test results. The result indicates a statistically significant positive relationship between financial development and economic growth in the long run and a negative and insignificant relationship in the short run. The error correction model in the various analysis is negative, less than 1 and significant at the 5 percent level, signifying a long run relationship between the explanatory variables and the dependent variable. While our analysis shows impressive results suggesting that financial development significantly contributes to economic growth in the long run in the WAMZ, the study recommends greater link between savings and investment and more financial inclusion, as well as the need to have banking crisis resolution frameworks in Member States.
Key Words: Financial Development, Economic Growth, WAMZ
JEL Classification: C33, E44, F43, O16 and O47
N’Yilimon NANTOB
Abstract
This paper examines the empirical importance of multiplicative parameter uncertainty on the conduct of the Central Bank of Nigeria’s monetary policy over the period 1980Q1–2015Q1. Theoretically, the certainty equivalence principle indicates that the optimal policy is not affected by the degree of uncertainty called “additive”. However, the “Brainard conservatism principle” states that under uncertainty about the transmission mechanism, monetary policy should be less aggressive than in certainty universe. We show in this study that the Brainard principle can be challenged not only by the choice of the model used but also by the preferences of the central bank. Using the framework of a parameterized model with parsimony of IS curve-Phillips curve-type and a simple rule, and the linear quadratic stochastic control approach by introduction the variance of the estimated parameters in the optimal control theory the results yield that the central banker are always very cautious when they have an inflation and output stabilization objective. However, when they are concerned to smooth interest rate, their behavior becomes more aggressive, with a degree of aggressiveness that depends in part on the objective of interest rate smoothing.
Keywords: Optimal monetary policy, Parameter uncertainty, Brainard conservatism principle, Interest rate smoothing, Nigeria.
JEL classification: E43, E52, E58.
Eseosa Joy Sowemimo and Milton Iyoha, Ph D
ABSTRACT
Foreign aid is considered a crucial tool for lifting African countries out of poverty and for fast tracking their economic and social development. Nigeria has the highest official development Assistance receipts in Africa but despite this, her macroeconomic performance is largely underwhelming. Existing literature is divided on the effectiveness or otherwise of aid in propelling growth. This paper investigates this issue using data from Nigeria. Interestingly, analysis from this study found a “U” shaped curve which implies that the benefit from aid is first negative before it becomes positive. The study posits that the reason for this peculiar aid-growth relationship in Nigeria is the rigidities in our macroeconomic and institutional frameworks. The study rather emphasizes government expenditure as a veritable tool for driving growth. It concludes that if government expenditure is channelled towards boosting domestic savings and investment as well as used for funding human capital development projects, it is likely that foreign aid will become an additional source of funding that can produce a significantly positive effect on the growth rate of the Nigerian economy.
Baba N. Yaaba
Abstract
The importance of inclusive financing to inclusive growth is no more in doubt. Thus, the Central Bank of Nigeria developed a financial inclusion strategy in 2012 to reduce the percentage of adult Nigerians excluded from the formal financial services so as to enable them contribute to the growth and development of the country. This study adopts modified versions of Sarma (2012) and Nicholas and Isabel (2010) methodologies to compute composite indices of financial inclusion and financial system stability, respectively for Nigeria from 2007Q1 to 2016Q4. The study then empirically examines, using autoregressive distributed lag (ARDL) approach, the dynamic linkages among financial inclusion, financial system stability and the efficiency of monetary policy. The results show that Nigeria has made a remarkable progress in the implementation of her financial inclusion initiative and that the financial system was fairly stable during the study period. The empirical result reveals that financial inclusion enhances the effectiveness of monetary policy. The study, therefore, recommends that the CBN should continue to pursue her financial inclusion drive with all vigor so as to expand not only the coverage but also the ease and pace of accessing financial services, as it is capable of enhancing the efficiency of monetary policy.
Key words: Financial Inclusion, Banking System Stability, FSI, Monetary Policy, Nigeria.
JEL Classification: E52, E58, G00, G21
Joseph Ayoola Omojolaibi and Monday Kingsley Oserei
Abstract
Fiscal sustainability is very important for macroeconomic stability, monetary policy effectiveness and the pursuit of economic growth. The current study accesses fiscal sustainability and growth dynamics in West Africa Monetary Zone (WAMZ). The literature on the issue of public debt considers it sustainable if the growth of debt is not greater than the growth of Gross Domestic Product (GDP). The study applies Panel data using the Hausman Test, Cointegration and Granger Causality methodologies were also used to evaluate fiscal processes in these WAMZ countries. A model for testing the sustainability of fiscal policy was also developed, based on the Intertemporal budget constraint while the outcome shows that fiscal policy in WAMZ countries is weakly sustainable which led to the recommendation that WAMZ countries should strengthen their fiscal performance.
Keywords: Fiscal Sustainability, Growth Dynamics, WAMZ, Panel Data Estimation,
Lionel Effiom and Peter Ubi
Abstract
This paper investigates the relative impact of domestic resource mobilisation (DRM) on the industrial sectors of Ghana and Nigeria. Three variables – remittances, tax revenue, and savings – were used to capture the DRM phenomenon. Employing the ARDL bounds testing procedure, findings indicate that all DRM variables had significant but varying effects on industrial sector performance in both countries. While remittances and tax revenues impacted positively on Ghana’s industrial output, they had opposite effect on Nigeria’s. Conversely, while savings had a benevolent impact on Nigeria’s industrial output, the same could not be said of Ghana’s. Furthermore, the two economies are plagued by deficient institutional capacity to mobilize local resources and deploy same to their industrial sectors. The study recommends, inter alia, the securitisation of future remittances by banks for critical infrastructure and developmental projects.
Keywords: DRM, Industrial Sector, Nigeria, Ghana
JEL Classification: D78, E22 and F65.
Estelle Amani Konan
RESUME
L’objectif de cette étude est de réexaminer la relation développement financier – croissance économique dans l’UEMOA sur la période 1990-2015. Respectivement par l’estimation d’un panel à effet aléatoire panel et par la méthode des MCO, nous estimons le modèle de croissance avec secteur bancaire et le modèle de croissance avec marché financier. Les résultats montrent qu’il existe une relation non linéaire entre le développement financier et la croissance économique dans l’UEMOA. Alors, comme perspectives de développement du marché financier de l’UEMOA, nous analysons la possibilité d’une intégration financière internationale de l’UEMOA en déterminant l’impact de l’intégration financière internationale sur le développement financier et sur la croissance économique. Les résultats des estimations par la méthode des variables instrumentales (IV) et par les MCO nous donnent des résultats ambigus qui montrent qu’une intégration financière internationale est très risquée et qu’il est préférable d’aller vers une intégration financière régionale au sein de la CEDEAO.
Mots clés : intégration financière, développement financier, secteur bancaire, marché boursier, croissance économique
Classification JEL : E44, G15, F36
