POLITICAL AND ECONOMIC DETERMINANTS OF SEIGNIORAGE IN NIGERIA

Aina Abiola Lydia

Department of Economics

 AjayiCrowther University, Oyo, Oyo State

E-mail:calloresjo1@yahoo.com

ABSTRACT

Seigniorage is a source of revenue for governments in developing countries especially if such countries are politically unstable. Nigeria as an oil export dependent has been faced with fluctuating revenues over the years. This short-fall at times was funded by seigniorage apart from other sources such as taxes and external debts. This has posed problems to the macroeconomic management of the economy. The sole objective of this paper is to evaluate the impact of political and economic determinants of seigniorage in Nigeria. The study covers the period from 1970 to 2007. Variables of interest to the study include seigniorage, per capita income, agriculture GDP ratio, trade GDP ratio and a set of proxies for political stability. Agriculture GDP ratio and trade GDP ratio were used to proxy the economic structure while political stability was proxied by three measures namely political rights, political stability and political stability dummy. Both determinants were evaluated within the context of the multiple regression analysis. Results show that per capita income and political instability were a major determinant of seigniorage, while, the economic structure was insignificant in explaining seigniorage. This study is of the view that political stability matters for managing the level of seigniorage in Nigeria. Hence, there is need for commitment by political leaders to manage resources efficiently so as not to resort to printing money.

Keywords: Seigniorage, Political Stability and Development