University of Nigeria A Presentation at an ILO workshop, 20 - - PowerPoint PPT Presentation

UGOCHUKWU AGU University of Nigeria

A Presentation at an ILO workshop, 20 September, 2011, Geneva, Switzerland

PRESENTER: ugoagu@gmail.com

• Economic Growth, Labour Market and Poverty Profile in Nigeria:
• Labor Market and Economic Growth in Nigeria
• The MDGs Goals, Unemployment and Poverty Profile in Nigeria
• Alternative Macroeconomic Policy towards Poverty Reduction
• Macroeconomic Policy Targets in Nigeria
• Monetary Policy in Nigeria
• Fiscal Policy in Nigeria
• Exchange Rate Policy
• Capital Account Management
• Alternative Policy Options

• Empirical Frameworks: SVAR Approach
• Responses to Monetary Policy Shocks
• Credit Growth Shock
• Monetary Policy in Nigeria
• Credit Growth Shock
• Monetary Supply Shock
• Exchange Rate Policy Shock
• Output growth shock
• Policy Implication:
• Achieving Decent Work and Sustained Poverty Reduction
• Summary

The CBN had always expressed disdain for double-digit inflation rate in the country. This has seen the apex bank’s Monetary Policy Committee (MPC) adjusting various monetary policy instruments to achieve that

• ambition. The MPC, which has operational

independence in the setting of interest rates in the country, had increased the benchmark interest rate – the Monetary Policy Rate (MPR) - four times this year

• This Day Newspaper

The International Monetary Fund [IMF] has said that monetary policy in Nigeria should be geared toward lowering "stubbornly high" inflation to single digits.

10 11 12 13 14 15 16 17 18 19 20 5.0 7.0 9.0 11.0 13.0 15.0 17.0 19.0 21.0 23.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Real Growth Rate of GDP National Unemployment Rate (RHS)

Real Gr eal Growth wth Ra Rate of te of G GDP DP and and Na Nationa tional l Unemplo Unemployment yment Ra Rate te in N in Nigeria igeria

• Risk in restrictive monetary policy
• The consolidation of macroeconomic stability and improvements in

major economic indicator

• An astronomical rate of growth in the past decade
• Direct correlation between employment and poverty reduction (Heintz,

2005)

• Increased growth, decreased employment opportunities and increased

poverty

• Mismatch between macroeconomic policy strategies and socio-

economic development goals in Nigeria

Draw an empirical contrast between the macroeconomic policies in post-SAP era in Nigeria, which is narrowly focused on inflation targeting and real exchange stability, and the overall goal of generating productive employment and poverty reduction

Nigerian Economic Performance

Rate of Growth of Oil and non-Oil GDP

3 4 5 6 7 8 9 10

• 10
• 5

5 10 15 20 25 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Oil Sector Growth (%) Non - Oil Sector Growth (%) GDP Growth(RHS)

Nigerian Economic Performance

Contribution of Oil and Non-Oil Sectors of GDP

0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Contribution to GDP (%)

Agriculture Industry Crude PetroL & Natural Gas Manufacturing Building & Construction Wholesale & Retail Trade Services Education

Nigeria Growing Employment Crisis

National Unemployment Rates

10 12 14 16 18 20 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Youth Unemployment rate (15-24)

10 15 20 25 30 35 40 45 50 Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural 2000 2001 2002 2003 2004 2005 2006 2007 2008

• Nigeria is one of the most youthful countries in the world
• About 45 percent of the country’s population is under the

age of fifteen (ILO, 2010; British Council & Harvard University, 2010)

• Youth unemployment rates are twice as high as the

national unemployment rate

• Nigeria faces highest rate of unemployment both in rural

and urban areas and across different labor sectors

Youth Employment to Pop. Ratio by Gender

51.7 51.8 51.9 52 52.1 52.2 52.3 52.4 52.5 52.6 52.7 10 20 30 40 50 60 70 80 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Employment to population ratio, 15+, female (%) Employment to population ratio, 15+, male (%) Employment to population ratio, 15+, total (%)

Total

• tal Cr

Credit of edit of C Commer

• mmercial Banks to S

cial Banks to SMEs MEs

5 10 15 20 25 30 35 40 45 50 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 % of Total Credit of commercial Banks to SME's

Volume of

• lume of Loa

Loans ns fr from

• m Commer

Commercial cial Banks Banks to to SME SMEs in Nigeria s in Nigeria

10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Volume of loans from Commercial Banks to SME's

Inflation, consumer prices (annual %)

10 20 30 40 50 60 70 80 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Fiscal Policy Targets

Overall Fiscal Balance

• 18.00
• 16.00
• 14.00
• 12.00
• 10.00
• 8.00
• 6.00
• 4.00
• 2.00

0.00 2.00 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Revenue performance (as % of GDP)

5 10 15 20 25 30 35 40 45 50 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Oil Revenue (as % of GDP) Non-Oil Revenue (as % of GDP)

Go Gover ernment nment spen spending ding

(as share of total expenditure)

Gr Gross Fix

• ss Fixed

ed Ca Capital pital

5 10 15 20 25 30 35 40 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Gross fixed capital formation as share of GDP (1980 - 2009)

k t i t i t i

Y AY v

 

 



 

Dmpr, Dm2, inf, Drexr, Dcredit, Dgdp Y 

• 20
• 10

10 20 30 1 2 3 4 5 6

Response of DMPR to DMPR

• 6
• 4
• 2

2 4 6 1 2 3 4 5 6

Response of DM2 to DMPR

• 8
• 4

4 8 1 2 3 4 5 6

Response of INF to DMPR

• 10

10 20 1 2 3 4 5 6

Response of DREXR to DMPR

• 10.0
• 7.5
• 5.0
• 2.5

0.0 2.5 5.0 1 2 3 4 5 6

Response of DCREDIT to DMPR

• 6
• 4
• 2

2 4 1 2 3 4 5 6

Response of DGDP to DMPR

Response to Cholesky One S.D. Innovations ± 2 S.E.

Figure 1: Monetary Policy Rate Shock

This conforms to results of other researchers in developing African countries (Chukwu 2009, Abradu- Otoo et al (2003), Epstain and Heintz (2006) that monetary policy contraction chokes the developing countries economy with a long lasting effect

• 4

4 8 12 16 1 2 3 4 5 6

Response of DCREDIT to DCREDIT

• 12
• 8
• 4

4 8 1 2 3 4 5 6

Response of DMPR to DCREDIT

• 4

4 8 12 1 2 3 4 5 6

Response of DM2 to DCREDIT

• 4
• 2

2 4 6 8 1 2 3 4 5 6

Response of INF to DCREDIT

• 15
• 10
• 5

5 10 1 2 3 4 5 6

Response of DREXR to DCREDIT

• 4
• 2

2 4 6 1 2 3 4 5 6

Response of DGDP to DCREDIT

Response to Cholesky One S.D. Innovations ± 2 S.E.

Figure 2: Credit Growth Shock

• 5

5 10 15 20 1 2 3 4 5 6

Response of DM2 to DM2

• 12
• 8
• 4

4 8 1 2 3 4 5 6

Response of DMPR to DM2

• 4

4 8 12 1 2 3 4 5 6

Response of INF to DM2

• 4

4 8 12 16 1 2 3 4 5 6

Response of DCREDIT to DM2

• 16
• 12
• 8
• 4

4 8 1 2 3 4 5 6

Response of DREXR to DM2

• 4
• 2

2 4 6 8 1 2 3 4 5 6

Response of DGDP to DM2

Response to Cholesky One S.D. Innovations ± 2 S.E.

Figure 3: Money Supply Shock

• 10

10 20 30 40 1 2 3 4 5 6

Response of DREXR to DREXR

• 10
• 5

5 10 15 1 2 3 4 5 6

Response of DMPR to DREXR

• 8
• 4

4 8 1 2 3 4 5 6

Response of DM2 to DREXR

• 12
• 8
• 4

4 8 1 2 3 4 5 6

Response of INF to DREXR

• 8
• 4

4 8 1 2 3 4 5 6

Response of DCREDIT to DREXR

• 4
• 2

2 4 1 2 3 4 5 6

Response of DGDP to DREXR

Response to Cholesky One S.D. Innovations ± 2 S.E.

Figure4: Real Exchange Rate Growth Shock

• 4

4 8 12 1 2 3 4 5 6

Response of DGDP to DGDP

• 4

4 8 12 1 2 3 4 5 6

Response of DCREDIT to DGDP

• 10.0
• 7.5
• 5.0
• 2.5

0.0 2.5 5.0 1 2 3 4 5 6

Response of DMPR to DGDP

• 2

2 4 6 8 10 1 2 3 4 5 6

Response of DM2 to DGDP

• 6
• 4
• 2

2 4 6 1 2 3 4 5 6

Response of INF to DGDP

• 15
• 10
• 5

5 10 1 2 3 4 5 6

Response of DREXR to DGDP

Response to Cholesky One S.D. Innovations ± 2 S.E.

Figure 5: Output Growth Shock

• Constraints to growth
• Nigeria’s pattern of jobless growth
• The upsurge in population of young people
• Credit crunch and expansionary monetary policy

impediments

• Revisiting consensus on macroeconomic policies in

Nigeria

Policy Recommendations

• Wisdom of Single Digit Inflation target in

Nigeria?

• IT is counterproductive to the goal of

employment generation.

• In the short term, we advocate for

accommodative monetary policy stances

• The big Question is- Employment

Generation in Nigeria or CBN Credibility?

THANK YOU FOR YOUR AUDIENCE!