Emre Ozsoz

An Evaluation of Price Based Determinants of Nigeria’s Real Exchange Rate

By using monthly data for the 2002-2010 period, we construct two novel indices for the real Naira exchange rate. We estimate determinants of both exchange rates by using a VEC model approach. Our estimations suggest that like most commodity exporting economies, to a great extent world oil prices, level of local currency in circulation and the level of foreign reserves held by the Central Bank can be used as good predictors of the long run equilibrium real exchange rate for Nigeria. We show that increases in the world price of oil have an appreciating effect while increases in the level of currency in circulation and in the reserves are associated with a depreciation of the Naira.

Real Exchange Rate Assessment for Nigeria: An Evaluation of Determinants, Strategies for Identification and Correction of Misalignments

By using monthly data for the 2004–2010 period and a vector error correction model approach, this paper evaluates the determinants of real exchange rates for the Nigerian Naira. Estimations suggest that oil prices, broad money supply, level of foreign reserves held by the Central Bank and interest rate differentials with trading partners can be used as good predictors of the long run Naira equilibrium real exchange rate. It is shown that the recent increases in the world price of oil have a significant appreciating effect in the real Naira rate, while increases in the money supply have the opposite impact. The study also uses the behavioural equilibrium exchange rate approach to identify the misalignments in the real Naira rate. Findings point out to the undervaluation of the Naira at the end of 2010.

How Cbn Confronted The Meltdown: The Global Financial Crisis And The Central Bank Of Nigeria’S Response

This paper provides an analysis of policy responses to the Global Financial Crisis by the Central Bank of Nigeria (CBN). Given its unique position as a major commodity exporter with a large population, Nigerian authorities utilized a mixture of policies including reductions in the monetary policy rate and capital reserve requirement, lending through the expanded discount window, money market interbank transactions guaranty and limitations on deposit money banks’ (DMBs) foreign exchange net open positions. CBN also rolled over margin loans that were extended to equity investors. As a result the country weathered the financial crisis with limited damage and recorded positive growth rates between 2008 and 2010.

Foreign Currency Lending and Banking System Stability - New Evidence from Turkey

This paper studies the drivers of foreign currency lending by Turkish banks along with its consequences for the banking system in particular and for the economy in general for the period between 2003 and 2009. Our sample ends in 2009 because foreign currency lending to households in Turkey is banned starting in the second quarter of 2009. We highlight possible risks to the Turkish banking system as a result of the systems heavy exposure to exchange rate and default risks. Our findings show that deposit dollarization seems to be the most important driver of loan dollarization in the case of Turkey. We also find evidence that larger banks in general tend to lend more in foreign currency. There is no evidence that bank cash holdings and their balances with the Central Bank affect bank lending behavior. We also evaluate whether the decision taken by the regulatory authorities in Turkey in 2009 to ban foreign currency lending to households had merits.