CBN raiaes monetary policy rate to 14%

The Central Bank of Nigeria (CBN) governor, Godwin Emefiele, has announced that the Monetary Policy Committee(MPC) voted to raise its Monetary Policy Rate (MPR) to 14%. The committee voted to raise the MPR by 200 basis point in a move which shocked many analysts who projected that the apex bank would hold MPR at 12%.

According to the governor, 8 out of the 10 members of the committee were in attendance at this month’s MPC meeting, of this number, 5 voted to raise MPR while 3 voted to maintain status quo.

MPC however retained Cash Reserve Ratio (CRR) at 22.5%, while Liquidity Ratio and the asymmetric corridor remain at 30% and +200-500 basis point respectively.
Emefiele said sluggish growth in the global economy, the Brexit vote, as well as weak growth in the United States all contributed to curtail expectation of global financial prosperity.
Faced with an environment of rising inflation, the MPC was faced with the twin goals of either voting to restart growth or fighting inflation, Emefiele said.

According to the CBN governor, the Committee is concerned about the need to urgently diversify the economy into agriculture, manufacturing, and services in order to rise above its current state. “The Committee expresses satisfaction with banks with regards to credit to the private sector, and encourages commercial banks to keep up the tempo, so as to grow the economy,” Emefiele said.

MPC members call on the Federal Government to fast track the implementation of the 2016 budget and drew attention to the depressing implication of non-payment of salaries.

Naira falls to 360 against the US dollar.

Again naira dips against the US dollars.
The naira fell to 360 against the United States dollar at the parallel market on Wednesday as the supply of the greenback waned at the foreign exchange market.

The local currency had closed at N354 against the greenback on Tuesday.

The naira has been experiencing high volatility since the beginning of the week, as supply gap at the interbank forex market continues to weigh on the parallel market.

The naira, which closed at 348 against the greenback at the parallel market on Friday, dropped to 351 on Monday before plunging further to 354 on Tuesday.

Foreign exchange dealers, who linked the development to dollar scarcity, said inadequate liquidity in the forex market was making the naira to depreciate very fast.

Currency analysts and experts said there was a need for the Central Bank of Nigeria to address liquidity issue at the interbank market in order to resolve the matter.

“It all comes back to liquidity, that is what drives the market, the Chief Executive Officer, Nigeria, Renaissance Capital, a United Kingdom-based investment bank, Mr. Temi Popoola, said.

Corroborating this view, a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said, “It is basically one thing – the supply side; activities are still currently low at the interbank market

“Nothing much is really happening on the supply side of the market. Liquidity issue is still there. We actually felt that foreign investors should have been coming in by now.”

The President, Association of Bureau De Change Operators, Aminu Gwadabe, said the volatility at the parallel market this week could be traced to the activities of currency speculators.

The naira had recorded relative stability against the dollar throughout last week, trading between 246 and 248 at the interbank market.

The ABCON president, however, said supply was still an issue, noting that currency speculators were taking advantage of the supply gap at the interbank market to fuel spike in the exchange rate at the parallel market.

Gwadabe explained, “A huge amount of demand is going to the parallel market. People can’t even get $1,000 for their Personal Travel Allowance; banks said they didn’t have. I think there is a need for the CBN to do something about the forex distribution channel. I believe it is only the BDCs that can do the distribution effectively.

“As much as possible, we want to be patriotic and work with the regulators as BDC operators. The parallel market operators are happy with this spike. It is high time the CBN checkmated this spike. The BDCs can be empowered by giving them access to the Diaspora remittances or the CBN window.”

Gwadabe said the significant influx of illegal forex operators from neighbouring countries was further compounding the exchange rate spike problem.

RenCap’s Popoola said liquidity could come to the interbank market if certain steps were taken by the government.

He stated, “Liquidity currently comes from only one source, the CBN. We can also get liquidity into the market through remittances, portfolio investors and foreign direct Investment. How do we do it? The answer is the price level. There is a price level that will drive liquidity into the market.”

However, he added that the forex market was still anticipating what would come out of the maturity of the first future transactions after the introduction of the new flexible forex regime.

“About $700m is due next week; everybody is looking forward to the maturity of the first forward transactions. So, the market appears to be in a wait-and-see mode. So, let us see what happens next week,” Popoola said.

The naira closed at 283.75 against the dollar at the interbank market on Wednesday. The external reserves were $26.3bn on July 12.

“I think the foreign investors are not comfortable with naira at around 280/dollar,” Ezun noted.
Source: punchng.com

Shirley Montag Almon- - A rare female genius in econometrics

Some months back during my master degree at the university of Lagos, i studied the almon approach to the distributed lag model. It was quite interesting and i fell in love with this technique almost immediately. I never knew the propounder was a woman. A beautiful woman she was when i searched for her online. I also discovered she was dead and she died early. She indeed impacted so much in the field of econometrics even with her short time here on earth. This woman have come to be one of my role models. To Shirley, your work on econometrics would

forever live on. Here is a brief profile of her I saw on Wikipedia.

Shirley Montag Almon (1935–1975) was an economist noted for the Almon Lag. She was educated at Goucher College Baltimore and then for her PhD at Harvard (1964). A core element of her PhD was published in Econometrica (1965) and introduced the now famous technique for estimating distributed lags. She went on to work at the Women's Bureau, the National Bureau of Economic Research, The Federal Reserve Bank of San Francisco, the Federal Reserve Board and at both Wesley College and Harvard University. Her most noted post was her appointment to the staff of the President's Council of Economic Advisors in 1966.[1][2]

Almon was born on February 6, 1935 in Saxonburg, Pennsylvania, the oldest of seven children of Harold and Dorothea Montag. She married Clopper Almon Jr. on June 14, 1958. She was diagnosed with a brain tumor in December 1967 after four years of various symptoms, and died on September 29, 1975 in College Park, Maryland.[1][3]

Selected publications Edit

"The distributed lag between capital appropriations and expenditures". Econometrica 33: 178–196. 1965. JSTOR 1911894.
"Lags between investment decisions and their causes". Review of Economics and Statistics 50: 193–206. 1968. JSTOR 1926195.

The Augmented Dickey Fuller Unit root test.

Hello, today I will be explaining the Augmented Dickey Fuller (ADF) unit root test.
The ADF test is a test for unit root in a time series sample. It is an augmented version of the Dickey Fuller test. The ADF test is used to test for data stationarity of a variable. For every time series analysis, it is necessary to ascertain the order of integration of the variable.  This enables one know the appropriate technique needed for analysis.
When all variables are stationary at levels which we call I(0), the OLS technique is most appropriate. When your variables are stationary at first difference I(1), we proceed to a cointegration test. The cointegration test allows us to test if variables in the model have long run relationship. If your variables have at least one cointegrating relationship, you proceed to run an Error Correction Model (ECM). If there are more than one cointegrating relationship, we run a Vector Error Correction Model (VECM), and if no cointegrating relationship, the Vector Autoregressive (VAR) model is said to be the most appropriate.
Back to the topic, since I'm an E-views user, the ADF test would be discussed with the use of the E-views platform. We assume that your work file has already been prepared on E-views.
STEP ONE:
Double click on the variable of your choice to open the data set or series.
STEP TWO:
Click view and scroll down to unit root test. On the unit root interface, you should take note of the Test type which already has the ADF test on it. Clicking on the drop down Icon,there are other unit root test types which would not be discussed now.
On the interface, there is the test for unit root test in; levels I(0), 1st difference 1(1), and 2nd difference I(2). In economic analysis, I(2) variables shouldn't be used.
STEP THREE
Click on level. This is to test if the variables are stationary at levels. You may assume intercept and no trend if you so desire or trend and intercept.
STEP FOUR
Leave the lag length automatic selection as it is.
STEP FIVE
Click OK.
STEP SIX
The ADF Unit root test result interface appears.
There are two ways at which you can interpreted the ADF result.
a) compare the absolute value of the test critical value at 5% level with the t-statistics value. If the t-statistics absolute value is greater than the ADF test statistics, we reject the null hypothesis of the presence of unit root and accept the alternative hypothesis that the variable doesn't have unit root problem and its stationary at levels.
b) we can also use the prob. Value to determine the stationarity of the variable. If the p.value is greater than 0.05, we fail to reject the null hypothesis of the presence of unit root ie. The variable is not stationary. If the p.value is less than 0.05 we reject the null hypothesis and accept the alternate hypothesis and conclude that the variable is stationary.
STEP SEVEN
If the variable isn't stationary at levels, we go back to the same procedure as before. We go to view-unit root test- click on first difference and okay.
And then follow the same procedures as before.

I hope this helps even without pictorial illustrations. Feel free to ask questions and make comment. Thank you.

My first Journal Paper

Hello, you can check out my first journal paper which I published at the African Journal of Social Sciences. The research work investigated if FDI crowd out or crowd in domestic investment in sub Saharan Africa. I used a dynamic arelano and bond GMM technique for the analysis and I found out that FDI actually crowds out domestic investment in sub Saharan Africa. You can get a copy from here http://www.sachajournals.com/ajss-volume-6-1--2016.htm

Feel free to drop your comments

WELCOME

Welcome to Chimere's blog. This blog would be centered on economic and econometric analysis. I'm about to get started. Feel free to comment at any time. Thank You.