Professor Fabio Canova Prof. Akpan Ekpo
By UDEME CLEMENT,ANALYSIS
The Nigerian banking industry is poised for greater productivity this fiscal year as nine banks made list of top 1,000 World Banks ranking and top 25 banks in Africa. This is a clear indication that the on-going reforms and new monetary policies mapped out by the Central Bank of Nigeria, CBN, to guide the operations of the banks are yielding positive results, even as financial analysts expressed satisfaction with the performance of the nine banks- Zenith Bank, First Bank, Guaranty Trust Bank, Access Bank, United Bank for Africa, Fidelity Bank, First City Monument Bank, Diamond Bank and Skye Bank.
Six years ago, the performance of most of the nation’s commercial banks declined, and that brought the emergence of 25 out of 89 banks in 2005, through the consolidation exercise initiated by the former CBN governor, Professor Charles Soludo. The exercise forced weak financial institutions into merger and acquisition to meet up with the N25 billion capital requirement then.
Meanwhile, the on-going reforms by the current governor of CBN, Lamido Sanusi, has further reduced the number of banks, even as CBN raised the Monetary Policy Rate (MPR) to 8.75 per cent, to further tighten money supply in anticipation of future rise in inflation in the economy.
For instance, the nine banks rescued in a $4 billion bailout by the apex bank in 2009, are now going into merger and acquisition to recapitalise before the September 30 deadline.
Accordingly, the blue print for reforming the financial system, according to CBN, is built around four pillars which include enhancing the quality of banks, establishing financial stability, enabling healthy financial sector evolution and ensuring that the financial sector contributes to real economy.
CBN stressed that these pillars would be executed through some strategies including fixing the problems of the banks, tightening regulation, adoption of risk-based supervision, effective consumer protection, and the reforming of the apex bank itself.
In that capacity, the West African Institute for Financial and Economic Management, WAIFEM, owned by the Central banks of The Gambia, Ghana, Liberia, Nigeria and Sierra Leone said that the financial sector needs appropriate monetary policy framework based on macro-economic forecasting to fast-track development in the industry.
As a major player in the financial sector, WAIFEM said the reforms in the financial sector needs efficient macroeconomic framework capable of describing the workings of the economy to enhance holistic transformation of the nation’s economy.
Speaking at the regional course on macro-economic modelling and forecasting for monetary policy for directors of research and senior economists organised by WAIFEM, its Director-General, Professor Akpan Ekpo, stated that modern policy analysis has shifted to the use of Dynamic Stochastic General Equilibrium, DSGE models.
“These models differ significantly from earlier generations of large-scale econometric models, and this has been regarded as a major progress in the ability of economists to conducts model-based policy analysis.
Thus, DSGE models are being employed in the policy process of several central banks, while others have begun to develop general equilibrium models for monetary policy analysis and for strengthening their forecasting frameworks,” he pointed out.
He said, “The macroeconomic modelling is imperative to describe the workings of the economy or a given aspect of the economy using a system of mathematical equations to specify the relationships between and among aggregate economic variables. These require a rigorous framework of analysis in which a sound knowledge of mathematics and statistical techniques of analysis are brought to bear on economic theory.
Through such analysis our understanding of the working of the economy is greatly enhanced. Especially for monetary policy management, it is important to bear in mind that macro-economic models suffer from important limitations.
Apart from the strong simplifying assumptions usually made, their major limitations involve weak micro-economic foundations, difficulty in obtaining reliable and consistent time series data, influence of modeller’s perception of the working of the economy and absence of distributional considerations in the evaluation of the effectiveness of policy changes.
Professor Fabio Canova, a senior economist and research professor from the Universitat Pompeu Fabra, Barcelona, Spain, said economic growth and development could be achieved through effective macro-economic policies formulation and application aimed at transforming various sectors of the economy for greater productivity.
He advised monetary policy formulators to be acquainted with appropriate macro-economic modelling and forecasting techniques needed to stimulate growth.
“Given certain limitations, it is vital that some intelligent value judgment based on knowledge of the unquantifiable variables and considerations of other non-economic factors be brought to bear on the results obtained from the models before the final formulation of socio-economic policies,” he enthused.
He said: “The course was intended to build competencies in areas of monetary policies formulation among directors of research and other senior economists of central banks, core ministries and other institutions.
This is key because as senior public servants, it is imperative that one is able to appreciate the intuition behind these emerging tools of economic analysis and, in particular, to be able to evaluate the forecasts generated there from.
‘’The course was designed to help participants understand the framework of structural general equilibrium modelling and its application in the analysis of monetary policy.”
Author: Chief Editor
Nigerian Community,News, Events and more
