Optimal Seigniorage and Tax-Smoothing in West African Monetary Zone (WAMZ): An Econometric Assessment

Abstract

The fiscal performance of many sub-Saharan African countries has been quite dismal over the past, with a number of them accumulating huge deficits. This paper examines fiscal sustainability in the West African Monetary Zone (WAMZ). It departs from the standard model of fiscal sustainability and adopts the optimal seigniorage and tax smoothing model. Using vector autoregressive model and data from two selected countries, Ghana and Nigeria, the study finds no concrete evidence in support of the optimal seigniorage and tax smoothing in WAMZ. The findings call for important fiscal reforms to reverse the persistent fiscal deficits. Such reforms should include measures to ensure compliance and eliminate fiscal corruptions

Size and Liquidity Effects in Nigeria: An Industrial Sector Study

“…The evidence in Table 1 under 17% and the low levels of money-plus-quasi money to GDP and equity capitalization to GDP infers that neither the banking system nor stock market are major sources of business finance domestically in Nigeria in preference to internal sources of capital for firms (Udoh, 2011). …”

On the Implications of Trade Openness, Foreign Aid and Democracy for Wagner’s Law in Developing Countries: Panel Data Evidence from West African Monetary Zone (WAMZ)

“…Udoh (2011), for example, note that government revenue generation still remain nonoptimal in addressing fiscal deficit problems in WAMZ countries. However, as Iyare et al (2005) note, if government expenditure expands but government revenue leads, then fiscal discipline will automatically follow.…”

“…Nonetheless, although these countries committed themselves to reduce fiscal deficits to 4% of GDP by 2003, this criterion is one that was missed by most member countries in 2010 5 . Udoh (2011), for example, note that fiscal deficits -usually financed through domestic and foreign borrowing -contribute immensely to the high inflation dynamics in WAMZ countries. Moreover, the lack of fiscal convergence and the fiscal behavior of governments of WAMZ countries remain the most critical constraint on the convergence programme of the proposed monetary zone (see Ojo, 2005;Debrun et al, 2005;Adam et al, 2010).…”

“…The present paper deals only with the first one and, in particular contributes to the existing literature on Wagner"s law (Adolph Wagner, 1835-1917 and the recent discussion on the need for fiscal discipline, fiscal policy coordination and innovative and efficient ways of revenue generation in WAMZ countries (see Guillaume and Stasavage, 2000;Debrun, 2000;Masson and Pattillo, 2003;Iyare et al, 2005, Debrun et al, 2005Frimpong and Oteng-Abayie, 2009;Udoh, 2011) in several respects. Firstly, it extends this line of research by introducing the impact of trade openness, foreign aid and democracy on government expenditure to determine whether Wagner"s law is fulfilled in these countries.…”

Government Expenditure in Nigeria: An Examination of Tri-Theoretical Mantras

“…Based on this, diverse fiscal policies measures are been adopted by the Nigerian government with the aim of managing public expenditures. Some of these policies include reducing total expenditures, increasing taxes in the society as well as adopting a not fashionable approach of Central Bank financing, which Udoh (2009) has referred to as the devil's alternative.…”