Economic review and sceptical musings on the TSA

The Monetary Policy Commitee meeting in November has come and gone but some critical questions as regards its efficacy in meeting policy goals remains, as well as fresh concerns raised on Fiscal policy effectiveness. Monetary Policy Rate (MPR) was reduced from 13% to 11% as well and the Cash Reserve Ratio (CRR) from 25% to 20%. It also changed the symmetric corridor of 200 basis points around the MPR to an asymmetric corridor of +200 basis points and -700 basis points around the MPR. Ostensibly, it is a sound decision given the trudging growth movements of the economy.

RGDP Growth trend

Nigeria’s Gross Domestic Product (GDP) grew by 2.84 per cent (year- on-year) in real terms in the third quarter of 2015. The growth was higher by 0.49% points from the growth recorded in the preceding quarter, yet lower by 1.12% points from Q1 growth figure 3.96% and also lower by 3.38 per cent points from growth recorded in the corresponding quarter of 2014. On a quarter to quarter basis though, RGDP rose by 9.19% which is higher by 6.62% points when compared to the preceding quarter’s Q-on-Q growth figure. However, the average growth rate recorded in the first three quarters of this year and previous shows a negative difference of 3.28%.

Given the country’s huge dependence on oil revenues, this slow growth can be attributed to falling oil prices and increasing oil supply glut among oil producing countries, as the global oil stock inventory has shown increasing glut trends since Q1 2014 and became significantly high from Q4 of last year. The undesirable momentum sustained till present quarter which explains trudging growth movements experienced from the Q1 of this year till present. This has further driven Government revenues down and restrained sufficient fiscal expansion needed to engineer economic growth.

The domino effect of widening oil supply glut has resulted in depleting Forex earnings and  has impacted the nominal exchange rates and made it difficult for the apex bank to continue to defend the naira consistently.

Without being deliberately cynical, tougher times could await the oil sector and the Economy at large with the imminent full resumption of Iran in oil production which will inevitably add to the widening oil supply glut experienced in the Global market. This will further drag oil prices, revenues and forex earnings down. Combined with difficulties administering tax collection from unstable parts of the country, an ineffective tax system and a non-diversified economy, we would expect the federal government to stagger in meeting its 8 trillion 2016 budget estimate.

A review of the battle for Price stability that is majorly the business of CBN further shows that that the battle is far from being won. The headline inflation rate has been on a steady rise since January with slight drops in July and October.

Obviously there are reasons to believe that the perennial negative Balance of Payment Position faced on the Nation’s current account has further driven up the inflation rates. Besides, since the country has a massive dependence on imported commodities that is denominated in currencies in which ours is losing value to, high prices will inevitably be ‘imported’.

The gloomy economic story does not end there. It extends to the stock market. Nigerian stock market ended Q3 on a negative note. Market key benchmark indicator, NSE ASI, recorded a -6.69% losses in Q3’15 to close the quarter bearish. Quarterly review of market performance reveals that the index recorded 5.39% gains in Q2 2015 and –8.40% loss in Q1 2015. A review of the monthly market performance further reveals that the highest monthly gain (+9.33%) was recorded in April 2015 while highest loss (-14.70%) was recorded in January 2015 in the build-up to the 2015 general elections while the last month of the quarter closed positive with +5.16% after it recorded four consecutive losses in previous months.

NSE ASI Perf. Review
YTD Market Perf. Review
Periods 31-Dec-14 30-sep-15 % change
YTD 34,657.15 31,217.77 -9.92%
Monthly Market Perf.
Jan 15 34,657.15 29,562.07 -14.70%
Feb 15 29,562.07 30,103.81 1.83%
Mar 15 30,103.81 34,744.82 5.45%
Apr 15 31,744.82 34,708.11 9.33%
May 15 34,708.11 34,310.37 -1.15%
Jun 15 34,310.37 33,465.83 -2.49%
Jul 15 33,456.83 30,180.27 -9.79%
Aug 15 30,180.27 29,684.84 -1.64%
Sep 15 29,684.84 31,217.77 5.16%
Quarterly Market Perf.
Q1 34,657.15 31,744.82 -8.40%
Q2 31,744.82 33,456.83 5.39%
Q3 33,456.83 31,217.77 -6.69%

Source: TheAnalyst, NSE

Overall, it has been a tale of bears and bulls but the net magnitude of the bears is larger under the period under review.

The essence of this review is to show the current state of the economy in order to analyze the logic behind the MPC decisions. The recent Treasury Single Account (TSA) policy implemented by the present administration is also one of the developments that influenced the MPC decisions. An unconfirmed report shows that nearly ₦3 trillion was mopped out of the Economy as a result of the policy. On the other hand, an estimated ₦1.4trillion was swept back in as a result of the reduction in CRR in both September and November. This leaves an estimated net difference of ₦1.6 Trillion mopped out of the Banking sector.

There are Stock and Flow effects of the mop out. The Stock Effect of it is equivalent to the exact amount swept out at that given point in time. If the distribution of these public deposits on each Bank’s total deposit portfolio is further investigated and proper sensitivity analysis done, the real effects of this policy on Individual banks can be known. The Flow Effect however, is the most destructive. This is the perennial loss of regular PSD inflow to banks in the future due to the deposit outflow. Such loss cannot be accurately estimated but it is intuitive to imagine how huge it will be.

Besides, some Banks are more vulnerable than the other as not all has the same market share and asset size. Wiping out all Public sector deposits (PSD) from such vulnerable banks with a high share of their total deposits as PSD is ominous. The waves of the economic downturn has already made some banks parsimonious in their credit policy. Prime lending rates are still over 18% in some banks. Though the reduction of CRR has driven interbank lending rates down drastically to 2.3%, it has not reflected in the commercial lending activities of Banks which of course is a no-brainer. The risk appetite of Banks will shrink after the outflow and make them more parsimonious in their lending transactions.

The Banking sector is key to the growth prospects of the Country as it has strong inter-Sectoral linkages with other sectors of the economy. One would have expected the Government to be more circumspect about the TSA before its full implementation. The reduction of budget misappropriation and corruption is the inherent benefit of the policy. However, filling a hole by digging another is fruitless.

Moreover, the CBN would have further eased the MPR to address the Flow Effect of the mopped out liquidity from the banking sector. Reducing the MPR by just 2% points is not impressive enough after considering the magnitude of decline of growth in economic fundamentals.

There are other ways Government can ensure financial accountability and monitoring without adopting the TSA. After sweeping out all these MDA funds into a CBN central account, the Government should first mandate every Bank to close all MDA accounts with them. Then the new MDA accounts will be linked to a central server that will be managed by both the bank and CBN. The Server will be the database of all transactions done on the accounts. Each commercial Banks can also be mandated by the CBN and Ministry of Finance to submit the account statement of each MDAs to them every month end for regular monitoring and audit. After proper audit, the Ministry of Finance can then make decisions on the idle funds that should be swept back into the CBN central account in cases where the Government has immediate funding needs.

Using this approach, the Government will solve the financial monitoring challenges it had which fed corruption and it will also preserve the buoyancy of the financial system. It becomes a win-win. However, having a single non-interest bearing repository account domiciled in the CBN that reduces the ability of the Banking sector to sufficiently create endogenous money is a detrimental process. It needs to be re-evaluated and modified for the sake of sustainable Economic growth.




Statistical/Econometrics video lectures and Knowledge bank.

In line with our ardent commitment towards contributing to the building of a knowledge driven nation that thrives on research and development and liberating curiosity, Kaybams Institute has achieved another milestone.

We made a comprehensive video tutorial that teaches you how to use major statistical softwares such as Eviews and SPSS in analysing your research works. We are aware that perfection lies in the obsessive attention to details and quality, which is why we employed a rich plethora of statistical and Econometric theories/topics to give you the needed tools to be a professional data analyst.

Below are the content outlines:


on Statistical/Econometric Analysis Using




  1. EViews Tutorials One
  • Descriptive Statistics; Mean, Median, kurtosis, skewness, Jarque bera statistics, etc.
  • ADF Unit root test
  • Johansen co integration test
  • Regression and Result interpretation
  • Wald coefficient test
  • Multi- collinearity test
  • Residual tests – Correlogram, Q-statistics, Histograms- Normality test, serial correlation LM test, White heteroscedasticity test
  • Differencing
  • Robust standard errors
  • Change of functional form of the model
  • Correcting for serial correlation : Autoregressive term approach and distributed lag approach
  • Comparison of models using Akaike and Schwarz criteria


  1. Eviews Tutorials Two
  • Correlation
  • Pairwise Granger Causality Test
  • Test of equality between series
  • Robust estimation


  1. Eviews Tutorial Three
  • Dummy Variable Technique:
  1. Analysis of Variance (ANOVA) models
  2. Analysis of Covariance (ANCOVA) models
  3. Structural stability test
  4. Use of interactive terms


  1. Eviews Tutorial Four
  • Vector Autoregression models (Unrestricted VAR)
  • Vector Error Correction Models (Restricted VAR)
  • Impulse response function


Questionnaire analysis using SPSS

SECTION C (bonus)

Full Microsoft excel tutorials


In addition, we believe the mental strength of a person rests heavily on the quality of books he reads, which is why we decided to create a KNOWLEDGE BANK which is an e-library for Economics students that includes over 700 top rated Economics textbooks and Journals spanning across all its sub-disciplines to meet your research and academic needs.

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  • Development Economics
  • Econometrics
  • Energy and Environmental Economics
  • Financial Economics
  • Health Economics
  • History of Economic Thought
  • Industrial Economics
  • International Economics
  • Journals
  • Labour Economics
  • Macroeconomics
  • Managerial Economics
  • Mathematics and Statistics
  • Microeconomics
  • Monetary Economics
  • Money and Banking
  • Public Finance
  • Urban and Regional Economics

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Intersectoral Linkages in Nigeria Economy



Using the rebased quarterly statistical figures from the CBN starting from 2010-2013, Kaybams Institute sought to know the degree of relationship and causality that exists between the major sectors in the Economy. A correlation matrix approach was used and also Pairwise Granger Causality test was employed to test for causality among these sectors. Our results are summarised below:

Results of Correlation Matrix between Real Gross Domestic Product and Agricultural Sector

The Agricultural Sector and the Real Gross Domestic Product have a strong positive relationship with a coefficient of determination of 74%. This means most of the variation of the RGDP is explained by the Agricultural sector.

The Industrial sector and the Real GDP have a very strong positive relationship of 95%.

The Construction sector and Real GDP has a moderate positive relationship of 58%.

Service sector has a very strong positive relationship with Real GDP with a high correlation coefficient of 90%.

Trade and Real GDP have a strong positive relationship of 72%.

Results of Correlation Matrix between Agricultural sector and other sectors

Agric sector and Industrial sector has a moderate positive relationship of 62%.

Agric Sector and Construction has a very weak negative relationship of 5%.

Agric sector and Service sector has a weak positive relationship of 40%.

Agric sector and Trade has a weak positive relationship of 25%.

Results of Correlation Matrix between Industrial sector and other sectors

Industrial Sector and Construction sector has a moderate positive relationship of 55%.

Industrial sector and Service sector has a very strong positive relationship of 94%.

Industrial Sector and Trade has a moderate positive relationship of 60%.

Results of Correlation Matrix between Construction Sector and Service, Trade.

Construction and Service sector has a strong positive relationship of 78%.

Construction and Trade sector also has a strong positive relationship of 78%.

Finally, Trade sector and Service sector has a strong positive relationship of 71%.

Pairwise Granger Causality Test

Since correlation doesn’t always imply Causation, we also carried out a pairwise granger causality test on the variables.

The Granger (1969) approach to the question of whether x causes y is to see how much of the current y can be explained by past values of y and then to see whether adding lagged values of x can improve the explanation. y is said to be Granger-caused by x if x helps in the prediction of y, or equivalently if the coefficients on the lagged x’s are statistically significant.

It is important to note that the statement “x Granger causes y” does not imply that y is the effect or the result of x. Granger causality measures precedence and information content but does not by itself indicate causality in the more common use of the term.

Our results is as revealed:

Agric sector Granger causes Real GDP and vice versa.

Industrial sector Granger causes Real GDP and vice versa.

Construction sector Granger causes Real GDP and vice versa.

Service sector Granger causes Real GDP and vice versa.

Trade sector Granger causes Real GDP but RGDP does not Granger cause Trade.

Industrial sector Granger causes Agric sector and vice versa.

Construction sector Granger causes Agric sector and vice versa.

Service sector Granger cause Agric sector and vice versa.

Our recommendation is that policy makers should encourage the sectors that have strong and moderate positive relationship with the Real GDP and other sectors through the effective manipulation of stabilization policies at their disposal. This is because they possess a great systemic influence on the economy. The sectors with weak intersectoral linkages should also be boosted in order of importance.

Nigeria’s Electricity Situation-A Case for the Maximization of Hydropower Production


Electricity sector overview

The dominant sources of power generation in Nigeria are natural gas and hydropower. The estimated installed electricity generation capacity is 8,644 MW, while available capacity is approximately 3,200 MW. With an estimated technically exploitable potential of 20,000 MW, the hydropower potential of Nigeria is high and hydropower currently accounts for about 32 per cent of the total installed commercial electrical power capacity.

Despite the country’s abundance of petroleum and other natural resources, more than 60 per cent of the country’s population has no access to electricity. The Annual electricity consumption per capita of the remaining 40 per cent is about 109 kWh due to frequent power interruptions, load shedding and poor electricity

Infrastructure. This instability of the electricity system is seen as one of the causes for poor health services and poor economic growth. Electrification access stands at 50.6 per cent. As of 2009, only 10 per cent of rural inhabitants, which makes up 50 per cent of the total population, are connected to the national grid.

The transmission network is overloaded with a wheeling capacity of less than 4,000 MW and has a poor voltage profile in most parts of the network, especially in the north part of the country where there is inadequate dispatch and control infrastructure, radial and fragile grid networks, frequent system collapses and exceedingly high transmission losses. Indeed, 40 per cent of the electricity generation is lost during transmission to the national grid. According to Llugbo (2012), vandalism and theft of cables and other vital equipment are frequent, as well as accidental destruction of distribution lines and illegal connections, what often results in over-loading of the distribution lines, unannounced load shedding, and prolonged and intermittent outages. Consequently, many industrial outfits have resorted to generating their own off-grid electricity. The African Development Bank (2009) has reported that instability in electricity supply is by far the most binding constraint to doing business in the country.

Small Hydropower Sector Overview and Potential

Nigerian’s Hydro Potential is high and hydropower currently accounts for about 32% of the total installed commercial electric power capacity. The overall large scale potential (exploitable) is in excess of 11,000MW. Nigeria has considerable hydro potential sources exemplified by her large rivers, small rivers and stream and the various river basin being developed. Nigerian rivers distributed all over the country with potential sites for hydropower scheme which can serve the urban ,rural and isolated communities. An estimation of river Kaduna, Benue and Cross river (at Shiroro, Makurdi and Ikom respectively) indicated that total capacity of about 4,650MW is available, while the estimate for the river Mambillla plateau is put at 2,33OMW.

Nigeria adheres to the internationally accepted small hydropower definition (10 MW capacity limit). Plants with capacities up to 1 MW are considered mini hydropower in Nigeria, and those with capacity up to 500 kW are considered as micro hydropower.

With the set-up of the UNIDO Regional Centre for Small Hydro Power in Abuja in 2006, Nigeria is considered as one of the few places for systematic capacity development in small hydropower technology in Africa. It should serve not only for domestic needs but also for giving guidance to other countries in Africa. Nigeria has a short term target of installing 100 MW of small hydropower capacity, and a medium target of 760 MW based on the renewable energy master plan of 2006.

There are various installed small hydropower plants reported for Nigeria. In 2011, it was reported that five small hydropower plants (up to 10 MW definition) exist in Nigeria (23.35 MW and 204.55 GWh/yr). However, the Baseline Report on Small-Scale Hydropower in the ECOWAS Region lists 45 MW of existing small hydropower plants (up to 10 MW), 18 MW of which needs to be rehabilitated, as well as an additional 191 kW of micro capacity.

There is varying information on the potential of small hydropower in Nigeria. According to UNIDO Regional Centre on Small Hydropower, the gross small hydropower potential (for plants up to 10 MW) is 720 MW, the technically feasible potential is 605 MW and the economically feasible potential is 498.4 MW. A study from 2006 identified 278 yet undeveloped sites 130 for small hydropower production with a total of 734.2 MW (with a definition of up to 30 MW).

Barriers to Small Hydropower Development in Nigeria

As discussed in the previous sections, the issues of vandalism, theft and illegal connections to the grid make investment in electricity infrastructure difficult and limit business opportunities, with many firms struggling or failing to survive as an indirect result of electricity supply problems. However, small hydropower, particularly in its micro and pico forms, offers the possibility of energy security to rural areas. Due to the difficulties in the electricity infrastructure both people and businesses are ready to embrace small hydropower and other mini-grid solutions. This provides a good springboard for small hydropower if it can overcome capacity building and technical barriers such as:

  • Lack of small hydropower skills and information of the potential sites;
  • Lack of feasibility studies;
  •  Need of information and awareness raising in rural areas;
  • Energy infrastructure financing difficulties;
  • Lack of energy service companies which can efficiently develop and operate the sites;
  • Absence of local small hydropower research and development and small hydropower equipment manufacturing.

Overlapping mandates and conflicts over responsibilities in Nigeria, including disagreements between the agencies responsible for water resources and those for power generation and distribution also affect small hydropower development.

Key Drivers for the Small Hydropower Output Market

Population growth creates the demand and market for small hydropower development. Population pressure leads to demographic changes which result in settlement over remote areas usually near sources of water. These settlers provide the demand and market for the SHP.

Such Government-sponsored programs as rural electrification, water resources development, cottage industries, rural enterprises, agriculture, poverty alleviation programs and health care services constitute important activities that can draw from the Small hydro scheme.

Diversification of community trades and services would also provide ready markets. The high cost of fuel, O & M and related expenses associated with diesel based generator sets together with the unreliability of fuel supply promote a justification for the SHP option. So does the remoteness of the rural areas as well as the absence of national power grid.

Improved community awareness through individual and general public education including interaction with other communities is also an important driver for the SHP market.

Social and Economic Benefits of Hydropower Development in Nigeria (Ismaila H.Z, 2006)

Industrial and economic development: There is a historical positive relationship in Nigeria between power availability and industrial and economic development, shown in the decline or stagnation of the manufacturing sector in Nigeria after the late 1980s. A faster pace of industrial development is expected when IPP begin producing and supplying additional cheap power. Normally 40%of power generated goes to industrial development. In rural areas agro based SME are most likely to develop. Nearly 200,000 employees get direct employment and the same number gets indirect employment. Similarly converting the SHP sites for tourism development and fish farming can create employment opportunity making more people to benefit from this, per project.

Clean power development  : Nigeria will suffer, if its sustainable hydropower potential is not tapped, since hydropower is its only easily harnessed indigenous power source. It is also one of the very few competitive advantages for the Country, since land, labour and other inputs to industrial development are costlier in Nigeria compared to other countries. The development of SHP projects reduces the usage of Diesel and Kerosene for generating electricity in the off-grid area for the high-income group. Also this will reduce the transportation cost for transporting the fuel from cities to the rural areas. Another aspect to be noted is the destruction of trees from the forest area for lighting and cooking. More over the SHP projects can be developed as a multipurpose project; the same can be used for flood control, drinking water purpose, irrigation, fish farming and for tourism development.

Improved availability and quality of the power supply : Reliable and adequate electric power will reduce the costs and losses currently suffered from inadequate power, and increase productivity, effectiveness and the quality of output, reduce hardships, inconveniences and disrupted services due to power interruptions, and reduce the expenditures made by businesses and households to compensate for inadequate power. Since Nigeria is facing power shortage during the peak hours, this additional capacity will help in improving the voltage in the distribution network.

Economic Growth and Employment: Poverty is clearly related to unemployment. The lack of electricity is an important constraint that works against employment, generating economic growth and contributes to the under utilisation of human and natural resources, resulting in widespread unemployment and poverty.

Although the poor generally do not qualify for new jobs in the industrial and manufacturing sectors, they can benefit from the multiplier effects of economic growth, such as new construction and increased expenditure in the informal sector. These types of unskilled jobs, however, tend to be low-paid, temporary and/or insecure. This has been demonstrated from experience, where income from the Gulf countries facilitated the increase of wage rates, not only in the construction sector, but also in agriculture, because of linkages in the labour market.

The availability of power would also enhance public services and infrastructure facilities such as communications, which are necessary for the growth of industries and activities in the service sector.

Public services: Continuous power is a necessary condition for the full operation of a range of public services, from health and medical services and facilities, street lighting, schools, and communications to water systems. All these services have major impacts on the quality of life through health, sanitation, education, safety and security, information and recreation. Forty-five percent of total households in Nigeria do not have access to electricity. Availability of electricity is critical for household work. Sufficient power throughout the day and evening will allow women to complete their domestic tasks more easily, quickly and effectively, and involve in other income generating additional activities, with benefits for all the family. If we are adding 732.0 MW from SHP, a major portion nearly 37 MW will go to domestic consumers, thereby providing electricity for additional 3,700 new consumers. Benefits for women: Human development of the populace depends not only on economic growth, but also on the quality of life in homes. Women have the major responsibility for maintaining and enhancing the well being of their families and their quality of life. Policies and services that support their productivity, health and creativity, benefit and support the entire family. Women, children and the aged are positively affected more, than men by the availability of electricity because more of their time and their work are carried out in the homes.

Quality of life: The outcome of adequate power availability will have both direct and indirect impacts on the quality of life at both the community and household levels. Increased availability and quality of electricity, combined with improved service delivery, will have immediate and direct effects on the quality of community and social interaction and of living conditions in homes, affecting health, nutrition, education, security, mobility, communications and recreation.

At the community level, improvements in the quality and reliability of power will improve the operation of water systems that depend on electric pumping, thus improving drinking water supply and sanitation. Health care services will be improved through better lighting, refrigeration, sterilization and water supply. Education will benefit from better lighting and communications systems. Functional streetlights will improve safety, security and mobility.

At the household level, a reliable power supply will result in improved living and working conditions. Nutrition and health will be improved through better facilities for food preparation and storage and improved water system operations. Continuous adequate lighting is an essential condition for improved education, and the full operation of lighting, fans, communications, television, and radios will result in improved leisure, rest and recreation.

Improved power supply will have important effects in industry and businesses by improving working conditions and productivity, and encouraging industrial expansion. Industrial growth has important multiplier effects, as well as creating new employment. Increased employment and higher income levels are essential for increasing the quality of life.

Our Mandate

KAYBAMS INSTITUTE is a research consultancy firm that is poised towards advancing the frontiers of research and development. We are professionals that seek to meet your educational needs especially as regards Research Consultancy and statistical/econometric analysis of research works. We are known to be the best among equals in meeting the needs of teeming students who have a high taste for quality in their project works. We write research works for clients, carry out extensive statistical and econometric analysis and can also help clients choose a research area that currently have high academic value.

We also have a knowledge bank which is an extensive library of e-books and journals for Business and Economics Students that seek to possess an invaluable library or selected books at their disposal.
In addition, we do organize tutorials/seminars on the use of Statistical softwares such as Eviews and Spss. This proves useful for independent researchers who needs to learn the required quantitative skills for data analysis in their research works.
Contact us on:
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