This paper presents a macroeconomic model of the Nigerian economy. The long-run relationships pertaining to the markets for money, foreign exchange, and (non-oil) output are estimated. Subsequently, dynamic equations are estimated for the price level, the real exchange rate, and output. The results are instrumental in explaining the dramatic developments on the foreign exchange market during 1983-86 and 1992-94, the secular depreciation of the real exchange rate since 1985, and the rise and fall of inflation during 1991-97. The methodology could usefully be applied to other economies whose exports are insensitive to exchange rate movements (e.g., other oil-based economies).
This paper provides a selective review of the literature on the determinants of inflation in Nigeria, analyzes the dominant factors influencing inflation, presents the empirical results of a reduced-form elasticities model, and discusses the policy implications of the empirical results. The results of this analysis confirm the basic findings of earlier studies, namely that monetary expansion, driven mainly by expansionary fiscal policies, explains to a large degree the inflationary process in Nigeria. Other important factors are the devaluation of the naira and agroclimatic conditions. With respect to the depreciation of the naira, it was found that concurrent fiscal and monetary policies had a major influence on its impact on inflation. Given the considerable role of food commodities in the CPI, agroclimatic conditions (rainfall) were found to play a significant role in overall movements in prices and should be fully taken into consideration in any analysis of the inflationary process in Nigeria.
This paper estimates the exchange rate pass-through to consumer price inflation in Angola and Nigeria, with particular emphasis on the changes of the pass-through over time. Even though the two countries share smilar dependence on oil exports, this paper reveals different results. For Angola, the long-run exchange rate pass-through to prices is high, though it has weakened in recent years reflecting the de-dollarization of the economy. In Nigeria, there is no stable long-run relationship between the exchange rate and prices, and changes in the exchange rate do not have a significant pass-through effect on inflation. However, the passthrough effect on core inflation is significant.
This study investigated the determinants of the exchange rate in Nigeria via evidence from the Error Correction Model (ECM) over the period 1981 to 2020. The study focuses on two main objectives. The theoretical review highlights three main exchange rate determination approaches: The Purchasing Power Parity (PPP), the Monetary Methodology, and the Traditional Flow Model. The research methodology employs cointegration and error-correction methods to estimate the model using yearly data for the specified time frame. The econometric analysis comprises three stages, including unit root tests to ascertain stationarity, cointegration tests to identify long-term equilibrium relationships, and the ECM to represent short-term and long-term dynamics. The empirical results reveal the presence of significant determinants influencing the exchange rate in Nigeria. These determinants include economic openness, real output capacity, net capital flows, money supply growth, government expenditure, real interest rate, and inflation rate. The ECM model analysis indicates both short-term and long-term relationships between these determinants and the exchange rate. The study contributes to a deeper understanding of Nigeria's exchange rate dynamics and provides valuable guidance for policymakers in formulating effective monetary and fiscal policies to manage exchange rate fluctuations and foster economic development.
Doktorarbeit / Dissertation aus dem Jahr 2019 im Fachbereich VWL - Außenhandelstheorie, Außenhandelspolitik, Obafemi Awolowo University, Sprache: Deutsch, Abstract: The study appraises different interest rate policies, exchange rate regimes and manufacturing sector in Nigeria from 1986 to 2017 and determines the effect of interest rate and exchange rate interaction on manufacturing sector output. It investigates the dynamic effects of exchange rate fluctuations and interest rate instability on manufacturing sector output, examines the response of manufacturing sector output to shocks from exchange rate fluctuations and interest rate instability. It also determines the threshold levels of exchange rate and interest rate that will spur manufacturing sector output in Nigeria. These are with a view to examining the relationship among exchange rate fluctuations, interest rate instability and manufacturing sector output in Nigeria. The study uses secondary data. Annual data from 1986 to 2017 on manufacturing sector output, exchange rate, interest rates, gross fixed capital formation, credit to manufacturing sector, real GDP per capita, agricultural sector output, construction sector output, trade sector output, service sector output, tax revenue, inflation rate and trade openness are obtained from the Central Bank of Nigeria Statistical Bulletin of various years and World Development Indicators of various years, published by World Bank. The data collected is analysed using tables, graphs, Fully Modified Ordinary Least Square estimator, Autoregressive Distributed Lag model, Vector Autoregressive model and Sarel Threshold model to achieve the stated objectives. The study concludes that exchange rate fluctuations and interest rate instabilty dampened manufacturing sector output in Nigeria.
While many scholars have carried out a lot of research on the impact of exchange rate volatility and price shocks on economic growth, this study departs from previous studies and seeks to provide suggestions for Nigerian policy makers on the attainment of an ideal exchange rate necessary to boost industrialization and industrial output. The economies of all the countries of the world are linked directly or indirectly through asset and goods markets. This linkage is made possible through trade and foreign exchange. The price of foreign currencies in terms of a local currency (i.e. foreign exchange) is therefore important to the understanding of the growth trajectory of all countries of the world. The consequences of substantial misalignments of exchange rates can lead to output contraction and extensive economic hardship. These therefore, bring up the issue of an ideal exchange rate necessary for the achievement of a set of diverse objectives - economic growth, containment of inflation and maintenance of external competiveness. This study employed the use of the ordinary least square technique to examine the impact of exchange rate stability on industry output in Nigeria using annual time series data from 1980 to 2013. The result of the study showed that domestic capital, foreign direct investment, population growth rate, and real exchange rate were significant determinants of industrial output. The changes in external balance and inflation were of little or no consequences to industrial output. Based on the findings, the researcher recommended that conscious efforts should be made by government to fine-tune the various macroeconomic variables in order to provide an enabling environment that stimulates industrial output and eventual economic growth.
Master's Thesis from the year 2017 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 4.24, Wilberforce Island (School of Post Graduate Studies), course: Banking and Finance, language: English, abstract: The aim of this study was to investigate the effect of monetary policy variables that were consistently adopted by the Central Bank of Nigeria (CBN), on the inflation rate in Nigeria for the period 2009-2014. Two key issues where addressed; one, whether there was a significant relationship between the policy variables adopted and inflation. Two, whether the combined impact of all these variables adopted, was significant on the inflation rate. Data was sourced from the CBN’s statistical bulletin 2014, from the website of the CBN and the National Bureau of Statistics (NBS). The Ordinary Least Squares (OLS) method was adopted because of its best linear unbiased estimation (BLUE) property. The Augmented Dickey-Fuller test for stationarity, showed that the variables were all stationary at order one (1). Cointegration test also revealed that a long run relationship exists among the variables. The results show that apart from the MPR, all other policy variables were significant at the 5% level of significance (the monetary policy horizon) and this addressed the first key issue highlighted. For the second key issue, the estimation model displayed that all the explanatory variables adopted by the CBN (as used in this research) accounted for 61% of the variation in the inflation rate as regards its rise or drop. Hence, the combined effect of all the variables adopted by the CBN did reduce the inflation rate, as the monetary policy shocks did get traction on the economy in arriving at the policy trajectory of an inflation band of 6-9%. The CBN should constantly examine its policy environment to determine the instrument mix optimization that best serves its prime purpose of macroeconomic stability, especially when its inflation target is achieved.
