Access to finance has been considered to be one of the important factors in influencing firms’ real activities and in promoting aggregates. However, literature on the relationship between finance and firm-level productivity is almost non-existent for African countries. This paper fills this gap by using cross-sectional firm-level data to estimate the effect of access to finance on labour productivity, total factor productivity (TFP), and the stochastic frontier trans-log model. This study also estimates an instrumental variable model – two-stage least square estimator to address potential endogeneity bias between access to credit and firms’ productivity. The results obtained show that the lack of access to finance, especially overdraft facilities negatively affects the productivity of firms in Africa. Also, smaller firms and sole-proprietorships are mostly affected because they have less access to finance. This study suggests that the development of a balanced financial system should be of topmost priority to policy makers. This ensures that more finance is channelled towards those firms whose productivity depends heavily on the availability of finance irrespective of their characteristics. This would result in firms increasing their investments in productivity-enhancing activities, which would benefit long-term economic growth.
The Naira maintained slight appreciation against the dollar in the review week. At the parallel market, the value of the Naira appreciated week-on-week by 1.6 percent to exchange at N380/$ on May 19, 2017. In addition, inter-bank market rate appreciated slightly by 15kobo to N305.45/$. The appreciation in both segments of the market are favorable effects of the CBNs continued forex supply in the week under review (In a bid to further ease forex liquidity, the CBN pumped a total of $457.3 million on May 15, 2017).
Activities in the manufacturing sector remained at levels recorded in 2016Q3. Specifically, manufacturing capacity utilization (a measure of potential manufacturing output that is actually realized) remained at 48.46 percent in 2016Q4 below average. During the quarter, structural bottlenecks such as epileptic power supply (average of 2, 548 Megawatts) in addition to forex constraints, hampered manufacturing activities. As such, high cost of raw materials and cost of production subdued activities in the short term. Recent efforts by the monetary authority to increase forex access to the manufacturing sector as well as improvement in gas supply and electricity generation would help minimize production costs and enhance production process.
Recent report in the media highlights that Nigerias GDP has dropped to $296 billion in 2016, in contrast to the $481 billion recorded in 20151 and Nigeria has lost its position as Africas largest economy to South Africa. This conclusion was based on the computation of GDP with current naira-dollar exchange rate. However, while the naira has significantly lost its official value since the adoption of a flexible exchange rate, estimating GDP merely with a single exchange rate figure (rather than its yearly average) cannot be regarded as an appropriate method to conclude on Africas largest economy.
Nigerias inflation rate remained above CBNs bandwidth of 6-9 per cent. Specifically, the inflation rate increased slightly from 9.55 percent in December 2015 to 9.62 percent in January 20165. The Core sub-index remains the main driver of inflation in Nigeria. The higher prices of items in the Core sub-index such as clothing and foot wears are reflective of higher domestic production costs as a result of the decline in the value of the naira relative to the dollar. However, in the period, the price increase was moderated by the stable price of Premium Motor Spirit (PMS). Going forward, without any sustainable policy measure to prevent the further depreciation of the naira, inflation may exceed the current single digit inflation rate in the near term.