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Money Supply on Economic Growth in Nigeria

Effect of Money Supply on Economic Growth in Nigeria (1981 – 2013)

 

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Over the years, the objectives of monetary policy have remained the attainment of internal and external stability and the promotion of long-run economic growth through price, monetary and output management. Monetary policy is concerned with discretionary control of money supply by the monetary authorities in order to achieve stated or desired economic goals (Adeolu et al, 2012). It refers to the combination of measures designed to regulate the value, supply and cost of money in an economy, to match with the level of economic activities and can also be described as the act of controlling the direction and movement of monetary policy and credit facilities in pursuance of stable price and economic growth in an economy (CBN, 1992). Read More »

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Impact of Inflation on Domestic Savings in Nigeria

Empirical Analysis of the Impact of Inflation on Domestic Savings in Nigeria (1981-2013)

 

ABSTRACT

The study examined the Empirical analysis of the impact of inflation on domestic saving in Nigeria over the period of 1981- 2013. The study employed time series data obtained from the central bank of Nigeria Statistical Bulletin. The study used cointegration and Error Correction Mechanism to determine the impact of inflation on domestic saving in Nigeria a multiple regression model was specified and used in testing the objectives of the study, regressed Total domestic saving (TDS) as dependant variables against Financial deepening (M2/GDP), Inflation rate (INF) and Interest rate (INT) as the independent variables. The findings revealed that the entire variables employed became stationary at first difference. Also reveal a presence of long run relationship of the model. The major findings in the study shows that there is an inverse but an insignificant impact of inflation on domestic savings in Nigeria. The study therefore recommends that there is need for the government to retain tight monetary and fiscal policies in order to fight inflation in the Nigeria economy. Since inflation have negative and insignificant influence on domestic savings in Nigeria. Read More »

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Domestic Debt on Nigeria Economic Growth

Impact of Domestic Debt on Nigeria Economic Growth (1981- 2013)

 

Abstract

This study examined the impact of impact of domestic debt on Nigeria economic growth over the time period of 1981- 2013. The empirical analysis that was carried out to achieve the objectives mentioned above were diagnostic tests such as unit root, co-integration, Error Correction Mechanism (ECM) and granger causality test ordinary least square (OLS). Regressed Gross domestic product (GDP) as dependant variables against Domestic Debt Outstanding (DDO), Domestic Debt Financing (DDF), Government Expenditure (GEX) and Interest rate (INT) as the independent variables, The result of our unit root showed that the all the variables employed were  stationary at first difference and also the result shows a long run equilibrium relationship between the variables in the model. Similarly, the ECM result revealed 1.83% speed of adjustment; the OLS result shows that there is a positive significant impact of domestic debt over economic growth in Nigeria, from the individual test and the joint F-test at 5% level of significance. The R-squared 50% further confirm a good goodness of fit of the variable employed.  Based on the findings above, the study recommends that Government should strive to finance budget deficit by resorting on domestic borrowing through the use of short term debt instruments like Treasury bill, since financing of domestic debt does not constitute a withdrawal from the economy instead of external borrowing. Read More »

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Domestic Savings on the Economic Growth of Nigeria

Impact of Domestic Savings on the Economic Growth of Nigeria (1980 – 2013)

ABSTRACT

The work investigated the Impact of Domestic Savings on the Economic Growth of Nigeria (1980 and 2013.) it was guided by three major objectives: i.e To determine if there exists any long-run relationship between domestic savings and economic growth in Nigeria; to ascertain if domestic savings can contribute significantly to Nigeria’s economic growth; and to determine the causal relationship between domestic savings and economic growth in Nigeria. The study adopted Multiple Regression Analysis based on Ordinary Least Square (OLS) technique using secondary data obtained from Central bank of Nigeria. The work adopted the following variables (RGDP), total domestic saving (TDS), per capita income (PCI) and interest rate (INT) which represented the explanatory variables, and sourced mainly from CBN statistical bulletin. A test on unit root was conducted using Augmented Dicey-Fuller test which indicated that all the variables were stationary at first difference of 5% level of significance. The Johansen cointegration test revealed the presence of long run relationship among the variables while the granger causality test showed that both domestic savings and real gross domestic product granger cause each other. ECM was used to ascertain the impact of domestic savings on economic growth of Nigeria, and the result show that domestic savings has positive impact on economic growth. The study concluded however that the observed impact can only be made manifest when it is co-joined with other variables; namely per capita income and interest rate. We recommended among others, that the government and the monetary authorities should make policies which would help to boost the savings culture of the people. Read More »

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Interest Rate Changes on the Performance of Deposit Money Banks

Impact of Interest Rate Changes on the Performance of Deposit Money Banks (DMBS) in Nigeria (2000 – 2013)

 

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

A solid and stable financial sector is essential to make a well functioning national economy and ensure balance liquidity within the economy. Appropriate liquidity management is essential to foster economic growth. Though, to achieve economic stability proper uses of fiscal and monetary policies are required. Despite establishing regulatory agencies and monetary policy committees, Nigerian banks have actually been deterred in creating adequate liquidity and additional credit for the sustenance of the entire economy.

The financial systems of most developing nations have come under stress as a result of the economic shocks of the 1980s. The economic shocks largely manifested through indiscriminate distortions of financial prices which includes interest rates, has tended to reduce the real rate of growth and the real size of the financial system relative to nonfinancial magnitudes (Davidson and Gabriel, 2009). Rasheed (2010), states that Nigerian economy saw different interest rates for different sectors in 1970s through the mid-1980s (Regulated Regime, 1960-1985). The preferential interest rates were based on the assumption that the market rate, if universally applied, would exclude some of the priority sectors. Interest rates were, therefore, adjusted periodically with ‘visible hands’ to promote increase in the level of investment in the different sectors of the economy. For example agriculture and manufacturing sectors were accorded priority, and the commercial banks were directed by the Central Bank to charge a preferential interest rates (vary from year to year) on all loans and advances to small-scale industries.

Since 1986, the inception of interest rates deregulation, the government of Nigeria has been pursuing a market determined interest rates regime, which does not permit a direct state intervention in the general direct of the economy (Adebiyi and Babatope-Obasa, 2004).

Lending which may be on short, medium or long-term basis is one of the services that deposit money banks do render to their customers. In other words, banks do grant loans and advances to individuals, business organizations as well as government in order to enable them embark on investment and development activities as a means of aiding their growth in particular or contributing toward the economic development of a country in general (Felicia, 2011).

Deposit money banks are the most important savings, mobilization and financial resource allocation institutions. Consequently, these roles make them an important phenomenon in economic growth and development. In performing this role, it must be realized that banks have the potential, scope and prospects for mobilizing financial resources and allocating them to productive investments and in return promote their performance. Therefore, no matter the sources of the generation of income or the economic policies of the country, deposit money banks would be interested in giving out loans and advances to their numerous customers bearing in mind, the three principles guiding their operations which are, profitability, liquidity and solvency (Adolphus, 2011).

However, deposit money banks decisions to lend out loans are influenced by a lot of factors such as the prevailing interest rate, the volume of deposits, the level of their domestic and foreign investment, banks liquidity ratio, prestige and public recognition to mention just but a few.

Lending practices in the world could be traced to the period of industrial revolution which increase the pace of commercial and production activities thereby bringing about the need for large capital outlays for projects. Many captains of industry at this period were unable to meet up with the sudden upturn in the financial requirements and therefore turn to the banks for assistance (Ezirim, 2005). However, the emergence of banks in Nigeria in 1872 with the establishment of the African Banks Corporation (ABC) and later appearance of other banks in the scene during the colonial era witnessed the beginning of banks’ lending practice in Nigeria. Though, the lending practices of the then colonial banks were biased and discriminatory and could not be said to be a good lending practice as only the expatriates were given loans and advances. This among other reasons led to the establishment of indigenous banks in Nigeria. Prior to the advent of Structural Adjustment Programme (SAP) in the country in 1986, the lending practices of banks were strictly regulated under the close surveillance of the bank’s supervisory bodies. The SAP period brought about some relaxation of the stringent rules guiding banking practices. The Bank and Other Financial Act Amendment (BOFIA) 1998, requires banks to report large borrowing to the CBN. The CBN also require that their total value of a loan credit facility or any other liability in respect of a borrower, at any time, should not exceed 20% of the shareholders’ funds unimpaired by losses in the case of commercial banks (Felicia, 2011).

1.2 Statement of Problem

The financial system of most developing nations of which Nigeria is among, have come under stress as a result of the economic shocks in recent time. Additionally, financial repression, which has largely manifested through discriminate distortions financial prices including interest rates has tended to reduce the real rate of growth and the real size of the financial system relative to non-financial magnitudes.

Consequently, most countries both developed and developing have taken major steps to liberalize their interest rates as part o the reform of the entire financial system. Such liberalization represents a policy responses, encompassing a package of measures to remove all undesirable state imposed constraints on the free working of the removal of interest rate ceiling and loosening of deposit and credit control (Killick and Marhn 1990).

Interest rate has contributed both positively and negatively on the economy (how people lend and borrow money as it effect the demand for and allocation of available loanable funds. Hence, the needs for this research work, to determine if the interest rates changes have helped in increasing the level of demand deposit bank when interest is high or low among banks in Nigeria.

The ultimate question that calls to mind at this juncture is “How do various interest rate changes of the apex bank affect the performance of deposit money banks in Nigeria? This study is therefore designed to analyze changes in interest rate of the Central Bank of Nigeria and performance of deposit money banks.

1.3 Research Question

This research seeks to examine the impact of interest rate changes on the performance of deposit money banks (DMBS) in Nigeria. and therefore attempts to answer these research questions:

  1. To what extent does changes in interest rate affect the performance of deposit money bank of Nigeria?
  2. What is the impact of monetary policy rate (MPR) on the performance of deposit money banks of Nigeria?

1.4 Objectives of Study

The main objective of this study is to examine impact of interest rate changes on the performance of deposit money banks (DMBS) in Nigeria. Other specific objectives include the following.

  1. To investigate whether there is a significant impact of interest rate changes on the performance of Deposit Banks in Nigeria.
  2. To determine whether there is a significant impact of Monetary Policy Rate (MPR) on the performance of deposit money banks in Nigeria.

1.5 Research Hypothesis

The hypothesis to be tested in the course of this study include

H0: There is no significant impact of interest rate changes on the performance of Deposit Money Banks in Nigeria.

H1: There is a significant impact of interest rate changes on the performance of Deposit Money Banks in Nigeria.

H02: There is no significant impact of monetary policy rate (MPR) on the performance of Deposit Money Banks in Nigeria.

H2: There is a significant impact of monetary Policy Rate (MPR) on the performance of deposit of Deposit Money Banks in Nigeria.

1.6 Significance of the Study

This study will be of immense benefit to the management of Deposit Money Bank and to the monetary authorities, also the research will be of benefit to the governments; to enable them know the causes of lack of funds within the economy. It can also be good to the Central Bank of Nigeria (CBN); to highlight on why interest rate policies fluctuate and show inconsistency from regulation to deregulation.

To the economists and the researchers; it will create an understanding concerning the relationship between interest rate changes and performance of Deposit Money Banks. Finally, to the academicians and students, it will serves as a source of secondary data for further research and it will also add to the existing stock of knowledge.

1.7 Scope and limitation of the Study

This study investigate the impact of interest rate changes on the performance of deposit money banks (DMBS) in Nigeria. In order to fully capture interest rate changes and how its effect on the economy, a thorough empirical investigation will be conducted with data covering period of 14 years i.e. 2000 – 2013.

The major factor which inhibited and reduced the quality of this research work is access to high quality and consistent data. Nevertheless, much effort was put in place to ensure that the quality of the work is improved despite these entire setbacks.

 

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Impact of Interest Rate Changes on the Performance of Deposit Money Banks (DMBS) in Nigeria (2000 – 2013)

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Impact of Monetary Policy on Price Stability in Nigeria (1981 – 2013)

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Monetary Policy on Price Stability in Nigeria

Impact of Monetary Policy on Price Stability in Nigeria (1981 – 2013)

 

Abstract

This study examined the impact of Monetary Policy on Price Stability in Nigeria for the period of 1981 – 2013. The study adopted time series econometrics analysis and descriptive statistics to determine the impact of Monetary Policy on price stability in Nigeria. For purposes of clarity, models were specified as (INF) dependent variable, (MS), (EXC) and (INT) as independent variables. In order to achieve the objectives of the research work, diagnostic tests such as unit root, co-integration, Error Correction Model (ECM) and Granger causality were carried out using annual time series data from CBN statistical bulletin. The result of our analysis shows that all the variables except MS was stationary at first difference while MS was stationary at second difference; the variables also have one cointegrating equation while the speed of adjustment of the co-integrating equations is 71.92% per annum. There was also a uni-directional relationship running from MS to INF. The research concluded that monetary policy significantly impacts on price stability in Nigeria. Based on the findings above, the study recommends that prices of necessary commodities in the market should be fixed by the government to enhance stability of price, similarly, the CBN should make more stringent punishment for non-compliance to the monetary policies by financial institutions. This will help to curtail the nefarious activities of some unscrupulous financial institutions’ operations which trade the welfare for the whole Nigerian populace for a penny.

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Trade Openness on Economic Growth of Nigeria

Impact of Trade Openness on Economic Growth of Nigeria (1982-2013)

 

ABSTRACT

This study examined the impact of Impact of Trade Openness and Economic Growth of Nigeria for the period of 1982-2013. The study adopted time series econometric analysis and descriptive statistics to determine the impact of Trade Openness and economic growth as well as the longrun relationship between Trade Openness and economic growth in Nigeria. For purposes of clarity, models were specified as (GDP), dependent variable, (EOP), (EXC) and (INF) as independent variables. In order to achieve the objectives of the research work, diagnostic tests such as unit root, cointegration, Error Correction Model (ECM) and Granger Causality were carried out using annual time series data from CBN statistical bulletin. The result of our analysis shows that all the variables except GDP and EOP was stationary at level while EXC and INF were stationary at first difference; the variables also have four cointegrating equations while the speed of adjustment of the co-integrating equations is 100.7% per annum. There was also a uni-directional relationship running from EOP to GDP. The reserch concluded that International trade significantly impacts on economic growth of Nigeria. Based on the findings above, the study recommends that trade policies and the application of such policies should be made more investor friendly, thereby fostering investment and contributing lower costs on government expenditure. The aim is to reduce inconsistent micro and macroeconomic decisions and to eliminate or at least minimize the incidence and opportunities for corruption. Read More »

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Multiple Taxation on the Performance of Small Scale Enterprises in Nigeria

Implication of Multiple Taxation on the Performance of Small Scale Enterprises in Nigeria

 

ABSTRACT

This study was undertaken to investigate the implication of multiple taxation on the performance of small scale enterprises in Anambra urban,AnambraState. The objectives of the study were to determine the extent to which multiple taxation affect the profitability and reinvestment rate of small scale enterprises. Data were collected from primary source using questionnaires. Survey research design was adopted. The hypotheses were tested using chi-square. It was found that formost small scale enterprises surveyed, they were faced with the problem of high tax rates, complex tax regulations and lack of proper enlightenment or education about tax related issues. Although, there was a general perception that tax is an important source of fund for development of the economy and provision of social amenities. The study revealed that multiple taxation affects the performance of small scale enterprises. In order to obtain a vibrant and flourishing small scale enterprises sector, the tax policy needs to be appropriate such that it will neither be encumbrance to the small scale enterprises nor discourage voluntary compliance. A suggested solution is by increasing tax incentives through reducing tax rates and increasing tax authorities’ support services through the provision of machineries for easy accessible of profit towards small scale enterprises. Read More »

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Investigating Fraudulent Financial Management Practices in Local Government System

Investigation into Fraudulent Financial Management Practices in Local Government System

 

ABSTRACT

The purpose of this study was to investigate into the fraudulent financial management practices in local government system in Ebonyi State. The study adopted a descriptive survey research design and was guided by four research questions. The population of the study was made up of five hundred and forty (540) staff selected randomly from six (6) Local Government Areas in Ebonyi State and the sample of one hundred and eight (108) respondents were used in the study. The instrument used for data collection was a well structured questionnaire. Statistical mean and standard deviation were used to analyze the research questions. The results of the findings revealed that there are financial management practices obtainable in Local Government system, also the major types of fraudulent financial management practice in Local Government system include theft of cash and obtaining of financial advantage by deception, Manipulation of staff salaries, Use of forged documents to obtain cash. The study also revealed that establishment financial due process unit and Inter-departmental checking system, etc, are effective strategies for controlling fraudulent financial management practice in Local Government system. The researcher recommended among others that in order to eliminate fraudulent financial management practice the principle of accountability should be enshrined in the system and there should be checks and counter checks on the activities of Nigeria local government councils and finally local governments should avoid the idea of embarking on projects to enhance personal and selfish interest. Read More »

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Liquidation and Banking Industry Stability in Nigeria

The Relationship between Liquidation and Banking Industry Stability in Nigeria

 

ABSTRACT

The relationship between liquidation and banking industry stability has helped to sustain public confidence in the solvency of the bank. The purpose of this project work was to investigate the relationship between liquidation and banking industry stability in Nigeria. The study used quantitative time series data and special package for social sciences (SPSS) method during analysis. The result of the test indicates long run relationship between dependent and independent variables. The result of our analysis shows that there is long run relationship between the level of bank failure and stability of Nigerian banking industry. The study also found that efficient management of non-performing loan is necessary for the stability of Nigerian banking industry. The implication of this is that if the policy makers did not control the level of non-performing loan, it will continue to bring about bank failure.  We therefore recommend that, there is an urgent need for effective monitoring of the level of bank failure in Nigeria to allow for acceleration of banking industry stability. This is necessary for its positive effect on the bank stability. Read More »

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