African Economic and Management Review

Computing the Investor Sentiment Index for Nigeria: Methodology and Applications

2023-12-04T20:07:04+00:00

This study computed an Investor Sentiment Index (ISI) for the Nigerian stock market using the Hamilton Filter Decomposition method. The objective is to estimate an Index that reflect Nigerian investor sentiment over the period from January 15, 2009, to November 21, 2024. The Hamilton Filter allows for the separation of long-term trends from short-term cyclical fluctuations, which are then normalized using the min-max approach to create a sentiment index that spans from 0 to 1. The findings from the computed index suggest that investor sentiment generally follows the market’s movements, exhibiting greater volatility during periods of crises, such as the 2008-2011 Global Financial Crisis and the 2020-2021 COVID-19 pandemic. Additionally, sentiment reacts swiftly to news and market changes, making it a leading indicator of market trends, though it does not always align perfectly with the underlying stock index. This research highlights the significant role of investor sentiment in driving market volatility and offers insights into the psychological factors influencing stock prices.

Analyzing the Impact of Regional Trade Agreements on Intra-African Trade

2025-04-16T10:03:55+01:00

This study investigated the impact of Regional Trade Agreements (RTAs) on intra-African trade by employing an augmented gravity model. Using Poisson Pseudo-Maximum Likelihood (PPML) estimation on panel data covering 36 African countries from 2008 to 2023, the analysis revealed that RTAs significantly enhance trade flows within the continent. In addition, economic size, geographical contiguity, and a shared official language were found to exert a positive and statistically significant influence on bilateral trade. Conversely, geographical distance had a negative but statistically insignificant effect in the presence of RTAs, suggesting that policy-driven integration may mitigate traditional spatial constraints. Based on these findings, the study recommends reinforcing the implementation of the African Continental Free Trade Area (AfCFTA) through regulatory harmonization and the systematic elimination of non-tariff barriers in order to unlock its full trade potential and foster deeper regional integration.

Exchange Rate and Total Factor Productivity in Nigeria

2025-07-02T21:38:10+01:00

This study investigates the relationship between exchange rate and Total Factor Productivity (TFP) in Nigeria from 1981 to 2022, recognizing TFP as vital to industrialization, trade, competitiveness, and economic growth. While prior studies have explored exchange rate dynamics, limited attention has been paid to its direct impact on TFP. Using an ex-post facto design and data from the World Development Indicators (WDI) and FRED, the study applies the ARDL model to assess both long- and short-run effects. Results show that exchange rate fluctuations significantly reduce TFP in both time frames, underscoring the need for exchange rate stability to support productivity. A unidirectional causality from exchange rate to TFP is also identified, emphasising the importance of macroeconomic policies. The study recommends adopting a managed exchange rate regime, bolstering foreign reserves, and pursuing structural reforms to enhance productivity and competitiveness.

Geopolitical Risk and Institutional Quality on Crop Production in Nigeria

2025-09-23T22:26:01+01:00

This study examines the impact of geopolitical risk and institutional quality on agricultural output in Nigeria using the Autoregressive Distributed Lag (ARDL) framework developed by Pesaran, Shin, and Smith. Empirical results indicate a long-run relationship among geopolitical risk, institutional quality, and agricultural output. Institutional quality exerts a significant positive influence on crop production over the long term, highlighting the importance of stable governance, rule of law, and effective institutions in promoting agricultural productivity. In contrast, geopolitical risk does not have a statistically significant effect on agricultural output, suggesting that domestic institutional strength may buffer the agricultural sector from external shocks. Access to credit also plays a vital role in supporting agricultural growth, reinforcing the need for robust financial systems that enhance farmers’ resilience and productivity.

Overall, the findings underscore that strong institutions are fundamental to sustaining agricultural output and ensuring food security, while weak governance, corruption, and political instability hinder progress.