A Multivariate Time Series Modeling of Major Economic Indicators in Nigeria

This study examined the effect of exchange rate dynamics on economic growth in Nigeria from 1985 to 2021. The study utilized secondary data sources from the World Development Indicators (WDI) and the Central Bank of Nigeria (CBN) Statistical Bulletin. It employed real gross domestic product as a measure of economic growth. In addition to the official exchange rate as a proxy for exchange rate dynamics, the study integrated other domestic factors that can affect economic growth, such as trade openness and external reserves. The econometric techniques employed in the study were unit root tests, cointegration, and autoregressive distributed lag (ARDL)/bound techniques. Following the outcome of the bound test, it was reported that a long-run relationship exists between economic growth, exchange rate, trade openness, and external reserves. The long-run ARDL results reveal that the exchange rate had a positive and statistically significant effect on real GDP in Nigeria, with a unit increase in the exchange rate raising the real GDP by 0.3986 units in the long run; trade openness had a positive and not statistically significant impact on real GDP in Nigeria, suggesting that a unit increase in trade openness increases real GDP by 0.0025 units in the long run; and external reserves had a positive and statistically significant impact on real GDP in Nigeria, indicating that a unit increase in external reserves increases real GDP by 0.4007 units in the long run. Based on the results, the study recommends that the government should develop policies that stabilize the exchange rate. This could involve enhancing foreign exchange reserves management, improving the transparency and predictability of foreign exchange interventions, and possibly considering a more flexible exchange rate regime that can adapt to external shocks while maintaining stability. Policies should focus on gradually opening up the economy to international trade through strategic trade agreements that protect key domestic industries while promoting sectors where Nigeria has a competitive advantage. This approach will help mitigate any negative short-term impacts while capitalizing on long-term benefits. Keywords: Exchange Rate, Trade Openness, External Reserves and Real Gross Domestic Product.

This paper examined money supply and inflation in Nigeria. The objective was to examine the extent to which components of money supply affect Nigerian inflation rate. Time series data was sourced from Central Bank of Nigeria (CBN) statistical bulletin and Stock Exchange Factbook. Nigerian Real Inflation Rate was proxy for dependent (INFR) variables while Currency in Circulation (CR), Demand Deposit (DD), Time Deposit (TD), Savings Deposit (SD) and Net Foreign Asset (NFA) were used as independent variables. The Ordinary Least Square (OLS) method of cointegration, Augmented Dickey Fuller Unit Root, Granger Causality was used as data analysis techniques. Regression result in the study shows that Currency in Circulation, Demand Deposit and Savings Deposit has negative relationship while Net Foreign Asset and Time Deposit have positive relationship with inflation. The Augmented Dickey Fuller Test proved non stationarity of the variables at level except Net Foreign Asset but stationary at first difference. The Granger Causality Test reveals no casual relationship running through the variables. The cointegration proved no long run relationship between the dependent and independent variables. The study conclude that Money Supply have significant relationship with Nigerian Inflation Rate. It therefore recommends effective management of money supply by the monetary authorities to achieve the monetary policy objectives of price stability.

In light of Nigeria’s high inflationary environment characterized by rising commodity prices and a growing public debt, this study aims to examine fiscal dominance hypothesis in Nigeria. Specifically, we investigate whether the borrowing activities of the fiscal authorities impede the Central Bank of Nigeria (CBN) in achieving price stability. To conduct this analysis, we utilize annual data on the budget deficit as a percentage of gross domestic product and the change in monetary base, covering the period from 1981 to 2022. The data for these variables were sourced from the Central Bank of Nigeria (CBN) official website and Statistical Bulletin. Our empirical analysis employs econometric methods, including unit root tests and the Toda and Yamamoto (T-Y) Granger non-causality approach. The results from our Granger causality test reveal the presence of bidirectional causality between the budget deficit and the growth of the monetary base, thereby violating the conditions for fiscal dominance. These findings suggest that the pursuit of price stability objectives by the Central Bank of Nigeria (CBN) is not constrained by the government's borrowing activities. Consequently, conventional policy tools can be effectively utilized to address inflationary pressures without compromising the government's ability to service its debt obligations. Overall, our study provides evidence that fiscal dominance does not appear to be a significant concern in Nigeria. This implies that policymakers can focus on implementing appropriate monetary policy measures to combat inflation, while ensuring that government borrowing activities do not hinder the achievement of price stability. Keywords: Fiscal Dominance, Budget Deficits, Monetary Base, Inflation

Economy of a country can absorb shock and as well boost confidence through external reserves. Hence, external reserves play an important role to the extent that it helps in stabilizing the country’s economy. This study focuses on modeling the Nigeria external reserves using time series technique. 30-year data were extracted from the Central Bank of Nigeria (CBN) bulletin from 1990 – 2019. Some economic tools used to diagonize the data are Augmented Dickey Fuller (ADF) test, unit root tests Kwaitkowshi – philips – Schmiot – Shin test in order to ascertain the stationary of the data. Meanwhile, Auto Regression Integrated Moving Average (ARIMA) model was used as model for prediction whereby Akaike Information Criterion (AIC) and Hannan-Quinn Information Criterion (HQIC) were used as model diagnostic checking. At original level, the data showed an upward trend and found out to be non-stationary. When further examined using the diagnostic economic tools, at first difference the data were found to maintain a state of equilibrium. Also, model diagnostic checking revealed that ARIMA (2,1,7) was found to be the appropriate optimal model and thereby used for forecast for the next five years. Hence, the forecasted values revealed that the Nigeria external reserves will continue to increase steadily. Consequently, government should put in place legal policies that will enhance, increase accumulation and proper management of external reserves.

Aims: This study seeks to explore a two-way relationship between Nigeria’s economic performance, measured by the GDP, and her stock of foreign reserves over time.
 Study Design: It uses secondary data - documented time series of Nigeria’s gross domestic product (GDP) and foreign exchange reserves (FER) – collected from various volumes of the Central Bank of Nigeria (CBN) Statistical Bulletin. The annual time series data cover a period of 38 years, from 1981-2018.
 Methodology: The time series properties of the variables were verified using the Augmented Dickey-Fuller (ADF) unit roots’ test procedure. Also, the Bounds test technique was used to test for cointegration while the autoregressive distributed-lag (ARDL) and error correction models were estimated to analyze short- and long-run relationships between the variables. Relevant diagnostic tests were carried out to validate the resultant model estimates.
 Results: Results of unit roots’ test reveal both GDP and foreign reserves as I(1) series. Bounds test for the GDP model revealed an observed F-statistic (.421) that is less than the critical lower bound F-statistic (4.94) at P=.05 and cointegrating relationship was not confirmed. However, Bounds test for the foreign reserves revealed an observed F-statistic (6.445) lager than the critical upper bound F-statistic (5.73) at P=.05 and cointegration was established leading to specification of a long-run error correction model (ECM). Result of ARDL model estimation shows that only one-year-lag of GDP was significant (P=.05) and positive in explaining variations in the current GDP. Previous year’s values of both GDP and foreign reserves have positive influence on the long-run foreign exchange with over 81.8% explanatory power. The adjustment coefficient of the error correction equation is highly significant (P=.001) with the desired negative sign, implying that previous periods’ errors are correctable by adjustments in the subsequent periods, and convergence is attainable. Granger-Causality test result revealed a unidirectional causality that runs from GDP to the external reserves.
 Conclusion: The study establishes a long-run relationship between stock of foreign reserves and economic performance in Nigeria. The finding corroborates the view that a booming economy has the propensity to attract foreign direct investment thereby boosting the stock of the country’s foreign reserves. To attract more FDI in the critical sectors of the Nigerian economy, the government should create enabling and investment-friendly environment, implement policies and programmes capable of amplify ease-of-doing-business, and boost investors’ confidence in the economy.

The study evaluated exchange rate stability and trade performance in Nigeria. On the intellectual foundation of the monetary approach to exchange rate determination, a model, exchange rate (EXRt) as a function of inflation (INFt), external reserve (EXVt), and trade balance (TDBt), while interest rate (INTt) is a control variable, was specified. Data on the variables were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin. Following the unit root test, the Toda-Yamamoto Granger Causality or Block Exogeneity Wald was carried out. The results showed that inflation, trade balance, and external reserves are not key determinants of exchange rate fluctuations in Nigeria. The findings have implications for the heavy dependence on oil exports, which makes the exchange rate more responsive to fluctuations in global crude oil prices than to domestic inflation or trade balances. The study recommended that policymakers consider alternative determinants of exchange rate stability beyond inflation, trade balance, and external reserves in exchange rate management in Nigeria.

The study evaluated the effects of monetary policy on price stability in Nigeria for the period 1981-2016. The consumer price index was used as the dependent variable while money supply, interest rate, exchange rate, Gross Domestic Product (GDP) and treasury bill rates were the independent variables. The research made use of secondary data obtained from Central Bank of Nigeria Statistical Bulletin and World Bank Development Indicators. The study employed Auto Regressive Distributive Lag (ARDL). The unit root test showed that all the time series data were not stationary series. The result showed in the short-run and long-run, exchange rate, money supply, GDP and open market operations have significant effects on price stability in Nigeria while interest rate is significant only in the short-run. Based on the findings, the study recommended among others, that Central Bank of Nigeria increase interest rates during inflation in order to control money supply and consequently inflation. Government should take policy actions swiftly so as to reduce lag problems. Also, monetary policy alone cannot be used to maintain price stability. It should, therefore, be supplemented by fiscal measures, non-monetary and non-fiscal measures.

This study explores the application of two zero-truncated distributions, Geometric-Zero Truncated Poisson (GZTP) and Zero-Truncated Poisson Pareto (ZTPP), in modelling economic datasets, with a particular focus on Nigeria’s key economic indicators. Secondary data from the Central Bank of Nigeria’s Statistical Bulletin (2021), spanning from 1989 to 2020, was used, covering variables such as Real Gross Domestic Product (RGDP), export and import goods, money supply, and Brent crude oil prices. The objectives were to: Introduce and describe the mathematical properties of the GZTP and ZTPP distributions; compare the performance of these distributions across datasets using metrics such as AIC, BIC, and MSE; and recommend the most efficient distribution for modelling economic variables and predicting trends. The study employs the Maximum Likelihood Estimation (MLE) method for parameter estimation, implemented in R programming. Model performance was evaluated using the Akaike Information Criterion (AIC), Bayesian Information Criterion (BIC), and Mean Squared Error (MSE). The results indicate that the ZTPP distribution outperforms the GZTP distribution across all datasets, with significantly lower AIC, BIC, and MSE values. Specifically, the ZTPP achieved an average AIC of -1422.54, BIC of -1422.55, and MSE of 30,161.94, compared to the GZTP’s -766.39, -762.82, and 31,163.2, respectively. These findings highlight the superior model fit and predictive accuracy of the ZTPP distribution, making it a more robust tool for economic analysis, particularly in cases where zero occurrences are impossible. This comparative study underscores the importance of choosing the right distribution for economic modelling to achieve high accuracy and reliable results.

The study examined appraisal of shipping trade influence on the economic growth in Nigeria from 1981-2016 by the use of secondary data collected from the Central Bank of Nigeria. The main objectives are to examine the trend of shipping trade in Nigeria as well as determine the influence of economic growth on gross domestic product (GDP). The study employed both descriptive and influential tools. The study adopted cointegration regression method for the analysis of each of the variables (shipping trade, external reserves and external debts). The results show that there is a statistically significant relationship between GDP and external reserves with p-value 0.0190. Also the result revealed that there is a statistically significant relationship between GDP and shipping trade with p-value 0.000. However, shipping trade and external reserves contributed positively at 1% and 5% level of significance respectively while external debts impacted negatively to GDP at 5% level of significance with a long run variance of cointegration regression. Therefore, the study suggests that government should do all it can to curtail foreign dominance and repatriation of profit for a more sustainable economy as well as upgrade port facilities, prevent unnecessary delays and encourage exportable goods for maximum deployment of ships. Keywords : External debts, External reserve, GDP and Shipping trade. DOI : 10.7176/CER/12-1-04 Publication date: January 31 st 2020

The article investigates the effect of foreign exchange reserves on Nigerian economic growth from 1970 and 2022. The methodology used to confirm the presence of a correlation between Nigeria’s external reserves and economic growth was the Autoregressive Distributed Lag Model Bounds Test and Error Correction Model. It was revealed that an increase in the gross domestic product was positively and significantly correlated with external reserve. The findings suggest that, over the long term, Nigeria’s external reserve, currency rate, export, import, and money supply all have a significant and beneficial impact on the country’s gross domestic product growth. However, during the study period, import, money supply, and export had more positive effects on GDP growth than external reserve and exchange rate. At a 5% level, the coefficients are statistically significant. These findings have a key consequence that external reserves are crucial for economic growth in Nigeria since they have a positive and significant link with both short- and long-term GDP growth. Given that these macroeconomic indicator variables have a large impact on GDP development, the government and other relevant organizations should develop policies that would help Nigeria increase its external reserve and achieve a stable and favorable exchange rate. Government, however, ought to concentrate on maximizing reserve building. As a result, optimal reserve is recommended in relation to the shocks the economy will experience and the debt’s existing value. The accumulation of reserves makes it necessary to pay for the importation of goods and services, infrastructural needs, agricultural needs, servicing of the country’s external debt, and financing domestic fiscal expenditure. As a result, optimal reserves will balance both economic growth and external reserves.

This study examines the effect of exchange rate on the performance of manufacturing industry between 1985 and 2022. The study proxied of exchange rate by real exchange rate, external reserve and trade openness while the performance of manufacturing industry was measured by manufacturing sector GDP. The theories adopted comprise: Purchasing Power Parity (PPP), Theory, Optimal Currency Area (OCA) Theory and Theory of Production. Annual temporal data for the study were sourced from Central Bank of Nigeria (CBN) statistical bulletin and Word Development Indicators (WDI) of the Word Bank. The techniques of data analysis adopted are unit root test, co-integration test and error correction model (ECM) approach. The study found that real exchange rate has a substantial unfavourable effect on manufacturing sector GDP in Nigeria, external reserve has a favourable and substantial effect on manufacturing sector GDP in Nigeria while trade openness has a favourable and substantial effect on manufacturing sector GDP in Nigeria. As per the finding, the study concluded that exchange rate plays a substantial role influencing the performance of manufacturing industry in Nigeria. The study recommended that government should formulate efficient and feasible trade policies that will liberalize trade and open the Nigerian manufacturing sector to foreign investors.

The study examined the analysis of trends and determinants of wheat production in Nigeria between 1981 and 2019. The data for this study are time series data at macro level spanning from 1981 to 2019. All the data were largely sourced from Food and Agriculture Organization (FAO) statistical data base, Penn world data of the university of Pennsylvania and Central Bank of Nigeria (CBN) statistical bulletin. The data include output of wheat in Nigeria, local and international price of wheat, real exchange rate, and external reserve. The data were analyzed using autoregressive distributed lags to access the relationship between wheat output and factors affecting wheat production in Nigeria. Results showed that external reserve, per capita income, market reforms and technological advancement significantly increased wheat production in Nigeria. Consistency of government policies and policy actions geared towards reducing wheat imports should especially pursued by the government.

This study ascertained the effect of monetary policy on importation in Nigeria covering the period 1990 – 2020. Data for the study were extracted from the Central Bank of Nigeria (CBN) statistical bulletin. The method of data analysis used is the linear regression method with the application of the Error Correction Model (ECM). The major findings of the study reveal that interest rate has a negative and insignificant effect on importation in Nigeria, exchange rate has a positive and insignificant effect on importation in Nigeria, broad money supply has a positive and significant effect on importation in Nigeria and there is a causal relationship between importation, trade openness and broad money supply. It is therefore the recommendation of the study that there is need for boosting domestic production so as to contend high level of import that may have a detrimental effect on our external reserves. Secondly; the Nigerian authorities should carry out reforms that would enhance the role of interest rate in order to mobilize funds for trade purposes.

This research work examined Effect of Fiscal and Monetary Policy Instruments on Economic Growth of Nigeria from 1985-2016. The study was anchored mainly on the quantity theory of money. The researcher used secondary data from the Central Bank of Nigeria (CBN) Statistical Bulletin from 1985-2016. The data collected were analyzed using descriptive statistics such as Mean, Standard Deviation and Skewness and the relationship between the variables of the model was tested using Autoregressive Distributed Lag Model (ARDL) regression analysis after the data was found to be stationary and integrated of different orders. The result of the ARDL regression analysis shows that monetary policy rate having a positive relationship with real gross domestic product is unexpected owing to its ultimate effect on prime lending rate which affects productive economic activities. Government recurrent expenditure was found to have positive significant relationship with economic growth. Accordingly, the long run relationship between monetary policy, fiscal policy instruments and economic growth in Nigeria points to the critical role of the monetary policy decision of the Central Bank of Nigeria and Federal Government fiscal policy programmes on growth and development of economy. This study concludes that monetary policy measured by monetary policy rate and the fiscal policies proxied by government recurrent expenditure have not significantly affected economic growth in Nigeria. It was recommended that the Central Bank of Nigeria should further develop the financial sector through making more funds available to the private sector by reducing monetary policy rate which affects interest rate ceiling on loans to the private sector. And that the Central Bank of Nigeria should further develop the financial sector through making more funds available to the private sector by reducing monetary policy rate which affects interest rate ceiling on loans to the private sector.

In many economies the major role of government is the regulation and stabilization of the system in other to achieve macroeconomic objectives, which include but not limited to sustainable economic growth, full employment, and price stability. Monetary and fiscal policies have been considered as viable economic planning strategies for achieving the stated macroeconomic objectives. But the extent to which each is to be used to achieve the desired objectives is a matter of intense debate among policy makers and economists. This study is on monetary-fiscal policy coordination and economic growth sustainability in Nigeria. The objective is to examine the contributions of monetary and fiscal policies to economic growth in Nigeria and how their coordination has affected the economy towards growth recovery and sustainability. Unit root test, co integration test, Auto Regressive Distribution Lag (ARDL) model and trend analysis were some of the econometric techniques used for data estimation. The following variables were used as explanatory variables – Money Supply (MS), Monetary Policy Rate (MPR), Total Government Expenditure (TEXP) and Tax Revenue (TXREV), while the dependent variable is Real Gross Domestic Product (RGDP) proxy of economic growth. The data were sourced from Central Bank of Nigeria (CBN) statistical bulletin covering the period of 37 years. The result of the st stationarity test showed that all the independent variables were stationary at 1 difference while the dependent variable was stationary at level form. The Bound test proved that there was the existence of long run equilibrium relationship among the variables. The result from the short run analysis showed that TXREV was significant in one period lag and negatively related to RGDP. In the long run MPR and MS have significant impact on RGDP and were rightly signed. The combined effect of monetary and fiscal policies on the level of economic growth in Nigeria is found to be weak and unstable over the years of study, which indicates weak long-run relationship between the explanatory variables and the dependent variable. It is therefore necessary to establish an appropriate framework to intensify coordination between monetary and fiscal policies as tools for economic stabilization. However increased autonomy of the Central bank and the Debt management office may help realize the desired objective.