Titus Ayobami Ojeyinka and Dauda Olalekan Yinusa
The study investigates the impact of external shocks on output composition (consumption and investment) in Nigeria for the period 1981:Q1– 2018:Q4. Trade-weighted variables from…
Abstract
Purpose
The study investigates the impact of external shocks on output composition (consumption and investment) in Nigeria for the period 1981:Q1– 2018:Q4. Trade-weighted variables from the country's five major trading partners are constructed to capture the impact.
Design/methodology/approach
The study employs a block exogeneity open economy structural vector autoregressive (SVAR) analysis in studying the stated relationship.
Findings
The study reveals that external shocks significantly affect consumption and investment in Nigeria. Results from the structural impulse response function suggest that foreign output, real effective exchange rate and foreign interest rate have significant negative effects on consumption and investment. Specifically, results from error variance decomposition show that foreign inflation and real effective exchange rate shocks are major drivers of fluctuations in consumption and investment in Nigeria. Interestingly, the study finds that oil price shock accounts for minor variations in consumption and investment in Nigeria.
Research limitations/implications
The findings suggest that consumption and investment in Nigeria are substantially and largely driven by external shocks.
Practical implications
There is need for the monetary authority and the Nigerian government to design appropriate policies to stabilise the naira and salvage the country's exchange rate from unexpected large swings so as to reduce the vulnerability of the economy to external shocks.
Originality/value
Previous studies on external shocks have concentrated on the impact of external shocks on aggregate variables such as output and inflation, while few studies on external shocks in Nigeria capture external shocks through single-country data. This study differs from previous similar studies in Nigeria in two ways. First, the study examines the impact of external shocks on output composition such as consumption and investment. Second, the study captures the impact of external shocks on the two components of gross domestic product (GDP) by constructing trade-weighted variables from Nigeria's five major trading partners.
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Bosede Victoria Kudaisi, Titus Ayobami Ojeyinka and Tolulope Temilola Osinubi
International remittances are an important segment of external financial flows in Nigeria, currently superseding official development aid (ODA) in terms of volume, and foreign…
Abstract
Purpose
International remittances are an important segment of external financial flows in Nigeria, currently superseding official development aid (ODA) in terms of volume, and foreign direct investment (FDI) in terms of stability. This study is motivated by the recent increase in remittance flows in Nigeria as the highest recipient in West Africa, and the fact that the growth impact of remittances is weak within the country. The financial liberalization index developed by Chinn and Ito (2006) is employed in this study to examine the role of financial liberalization in the remittances-growth nexus in Nigeria over the period 1990–2018.
Design/methodology/approach
To address the possibility of endogeneity among the variables in the model, the study employs the generalized method of moments (GMM) as a technique of analysis.
Findings
Remittances and financial liberalization are found to have negative significant impacts on economic growth. However, the effect of the interaction term of financial liberalization and remittances on economic growth is positive and significant. This suggests that the two variables act as complements in the enhancement of economic growth in Nigeria. The study thus concludes that financial liberalization is a strong transmission channel through which remittance inflows positively affect economic growth in Nigeria. The study also advocates for a well-developed financial sector in order to attract more growth-enhancing remittances into the country.
Research limitations/implications
The implication of the research findings is that an unrestrained financial sector is necessary to encourage and optimize the benefits of remittance flows on economic growth in Nigeria.
Originality/value
Previous studies have considered the effects of financial development on the remittances-growth nexus in Nigeria. However, this study examines the role of financial liberalization in the nexus between remittances and economic growth in Nigeria by using the Chinn and Ito (2008) index of financial openness.
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James Temitope Dada, Titus Ayobami Ojeyinka and Mamdouh Abdulaziz Saleh Al-Faryan
This paper investigates the (a)symmetric effects of financial development in the presence of economic growth, energy consumption, urbanization and foreign direct investment on…
Abstract
Purpose
This paper investigates the (a)symmetric effects of financial development in the presence of economic growth, energy consumption, urbanization and foreign direct investment on environmental quality of South Africa between 1980 and 2017.
Design/methodology/approach
A robust measure of financial development is generated using banking institutions and non-banking institutions market-based financial development indicators, while environmental quality is measured using carbon footprint, non-carbon footprint and ecological footprint. The objectives of the study are captured using linear and non-linear autoregressive distributed lag.
Findings
The result from the symmetric analysis suggests that financial development stimulates carbon footprint and ecological footprint in the short run; however, financial development abates non-carbon footprint. In the long run, financial development has a significant negative effect on carbon footprint and ecological footprint. However, the asymmetric analysis established strong asymmetric effect in the short run, while no asymmetric effect is found in the long run. The short run asymmetric analysis reveals that positive shock in financial development increases carbon footprint and ecological footprint; however, positive changes in financial development reduce non-carbon footprint. Negative shocks in financial development, on the other hand, have a positive impact carbon footprint, non-carbon footprint and ecological footprint.
Practical implications
The study's outcome implies that the concept of “more finance, more growth” could also be applied to “more finance, better environment” in South Africa. The study offers vital policy suggestions for the realization of sustainable development in South Africa.
Originality/value
This empiric adds to the body of knowledge on the influence of financial development on various components of environmental quality (carbon footprint, non-carbon footprint and ecological footprint) in South Africa.
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Folorunsho M. Ajide and Titus Ayobami Ojeyinka
One of the main obstacles to the flourishment of African entrepreneurship is financial constraint. Existing studies on the nexus between entrepreneurship and financial development…
Abstract
Purpose
One of the main obstacles to the flourishment of African entrepreneurship is financial constraint. Existing studies on the nexus between entrepreneurship and financial development are inconclusive, while the position of African economies remains unknown. The purpose of this paper is to empirically study the impact of financial development on entrepreneurship in Africa.
Design/methodology/approach
This study utilizes data of 20 selected countries in Africa over a period of 2006–2017. International Monetary Fund (IMF) data on broad-based financial development were combined with World Bank Entrepreneurship database. This study uses system generalized methods of moments (system GMM) technique and the recently developed dynamic panel threshold based on dynamic panel GMM.
Findings
The following findings emerged: financial development does not spur entrepreneurship in Africa; there is a threshold at which financial development improves the level of African entrepreneurship; and the tendency of financial development to improve the level of entrepreneurship is conditioned on conducive business regulation and strong institutional quality at a specific threshold value.
Originality/value
This is one of the few studies that examines the impact of financial development on entrepreneurship in Africa. This study shows that the financial development relies on the effectiveness of regulatory environment to extend loan and other financial services to new firm entrants. In addition, the results of this study reveal that the assumption of linearity in the nexus between finance and entrepreneurship is not tenable for the case of Africa. Therefore, policymakers should keep on developing African financial system to accelerate the pace of entrepreneurship development.