The centrality of exchange rate in stock market performance cannot be over-emphasized. Thus, this study examined the dynamic effects of exchange rate on market capitalization in Nigeria. The specific objectives are to examine the effects of nominal exchange rate, real effective exchange rate, real interest rate and inflation rate on market capitalization using time series data which were obtained from the WDI and World Federation Exchanges Database between 1993 and 2020. Unit root test, cointegration test, ARDL estimation method, Granger causality tests were applied to analyze the data. The unit root test results showed that only market capitalization is stationary at levels whereas the other variables become stationary at first difference. The bounds cointegration test result revealed that market capitalization has long run relationship with the explanatory variables. The results revealed that real effective exchange rate impacted positively on the market capitalization. This implies that increase in real exchange rate (depreciation of the naira) creates opportunity for increase in the capital market size. The results further revealed that nominal exchange rate has an insignificant positive effect on market capitalization in the short run and long run. This could be linked to the inconsistency that characterizes the official exchange rate policy in Nigeria. It was also found that real interest rate has significant negative effect on market capitalization in the long run. At the same time, inflation rate negatively affected market capitalization. The Granger causality test results showed that a unidirectional causality runs from real interest rate and market capitalization. Given the findings, this study recommends that policymakers should ensure that the exchange rate management prioritizes a realistic and stable exchange rate to boost global competitiveness and improve market capitalization.
This study deepens the understanding of the dynamic relationship between trinity policy trade-offs and GNI per capita in Nigeria between 1980 and 2020. The external reserve is introduced to the empirical model in recognition of its role in stimulating the effectiveness of trinity policy goals. Data for the variables were sourced from the National Bureau of Statistics, CBN Statistical Bulletin and World Bank World Development Indicators (WDI) among others. Descriptive statistics, Phillips-Perron unit root test, bounds cointegration and ARDL model as well as Tado-Yamamoto causality form basis for data analysis. The unit root test results reveal that the variables are mixed integrated. This necessitates the application of the bounds cointegration test. As observed from the results, a long-run relationship exists between GNI per capita and trinity policy indexes. It was found from the ARDL estimates that monetary autonomy and capital mobility have a significant positive effect on GNI per capita in both the short and long run. This suggests that more monetary policy sovereignty and openness of the financial architecture yield positive benefits of improved living standard. The result further showed evidence of long-run causality flowing from external reserve to GNI per capita. This finding explains why policymakers in Nigeria have continued to prioritize external reserve build-up for sterilized intervention and stimulating policy effectiveness. Given the findings, this study recommends that policymakers should strive to maintain appreciable monetary autonomy and gradually collapse restrictions on cross-border capital flows to improve economic well-being in Nigeria.
In this study, the asymmetric relationship between oil rents and human development in Nigeria was examined between 1981 and 2020. Specifically, the nonlinear autoregressive distributed lag (NARDL) model was employed to ascertain how the partial sums of positive and negative changes in oil and gas rents contributed to the human development index (HDI) with time-series data obtained from the United Nations Development Programme (UNDP) Human Development Report and World Development Indicators (WDI). In addition, unit root and bounds cointegration tests were employed to determine the stationary properties and long-run relationships among the variables. It was found from the unit root test that the variables were fractionally integrated. It is also evident from the bounds cointegration results that HDI has a long-run relationship with oil and gas rents. The findings revealed that oil rent has not yielded the intended and desired positive benefits in terms of improving human development given its insignificant positive contribution to HDI. On the other hand, HDI responded positively to positive changes in natural gas rents and this finding was statistically significant at a 5 per cent level. This implies that an increase in natural gas rents plays a significant role in improving human development. Given the findings, this paper recommends proper management and accountability of the oil rents to create better opportunities for human development. It is also recommended for government to mitigate gas flaring and create enabling environment for more investments in gas resources to provide a roadmap for more investments in human development.
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