African Journal of Economic Review

Impact of off-farm Employment on Rural Household Food and Nutrition Security: Evidence from the Southern Highland Regions of Tanzania

Fausta Marcellus Mapunda — 2024-11-30

Despite the rural off-farm economy becoming increasingly important, the question whether off-farm income-generating activities increase household food and nutritional security in Tanzania remains unanswered. The current study explores the issue of off-farm employment by addressing two objectives: (i) to examine the drivers of households’ decision to participate in off-farm employment in a high-potential agricultural zone in Tanzania and (ii) to evaluate the impact of off-farm activities on rural households’ food security and nutritional security. We use household survey data from the southern highland districts of Mbeya and Songwe regions collected in 2014 and 2016. We employ difference-in-difference and propensity score matching techniques to evaluate the impact of participation in off-farm employment on household food security using three indicators with different recall periods. Results show that more adults per household and a larger farm size stimulated involvement in off-farm activities, while farming experience and livestock ownership had a limiting effect. Participation has a significant impact on food security, but the strength of the effect depends on the specific indicator selected. We recommend that the development of policies and programs that pay more attention to off-farm work can boost rural household income and thus promote food security and nutritional security.

Digital Payment Fraud and Bank Fragility: Evidence from Deposit Money Banks in Nigeria

Rahmon A. Folami — 2024-11-30

Digital payment is revolutionising the banking sector globally, offering real time, convenient and efficient services to customers. However, this transformation is also creating new challenges including digital payment fraud. This study investigated the relationship between digital payment fraud and bank fragility in Nigeria's deposit money banks. The study used the Panel Fully Modified Least Squares (FMOLS) method to analyse the data collected from the annual report and statement of accounts of a sample of fourteen deposit money banks over the period of ten years (2014 to 2023). The findings revealed that digital payment fraud exerts a significant effect on bank fragility, with implications for profitability returns. Additionally, the study highlighted the importance of bank size as a mitigating factor in reducing fragility and enhancing financial performance. These findings contribute to the understanding of the risks associated with digital payment fraud and provide insights for policymakers and practitioners in addressing this growing concern in the Nigerian banking sector. The study recommended the need for banks to prioritise and strengthen Cybersecurity measures and implement effective fraud detection systems to mitigate the risks associated with digital payment fraud.

Impact of Geoeconomic Fragmentation on Macroeconomic Performance in West Africa: The Moderating Role of Governance

Ayodele F. Oshodi — 2024-11-30

Many studies projected that the consequences of geoeconomic fragmentation would vary across regions and will be more severe in developing countries particularly those that are more dependent on commodity trade, it is therefore imperative to carry out a regional-specific study. Hence, this study investigates the partial effects of six fragmentation measures on economic performance in the West African Sub-region. The study further examines the total impact of fragmentation while accounting for the moderating influence of governance indicators. Panel data from fourteen West African countries from 1991 to 2022 were analysed using fixed effect within and random effect GLS estimators, while the preferred method was chosen using the Hausman specification test. The results show that all the forms of fragmentation in terms of trade restrictions are harmful to the economic performance of West African countries, with exchange and export restrictions having the largest consequences. However, improvement in governance reduces the negative effects of fragmentation. Particularly, improvement in control of corruption, government effectiveness, regulatory quality, and the rule of law can moderate the impact of fragmentation. It is recommended that efforts should be intensified to improve the quality of governance in West Africa countries to mitigate the negative consequences of the growing trend of fragmentation due to rising geopolitical tensions across the globe.

The Effect of Fiscal Policy Shocks on Income Inequality and Household Poverty Reduction: Evidence from Nigeria

Iyanuoluwa Fatoba — 2024-11-30

This study aims to investigate fiscal policy shocks' impact on Nigeria's Income Inequality and Household Poverty. Using the impulse response function and variance decomposition technique within the Bayesian Vector Autoregressive framework (BVAR), findings from the study show that from year 2 to 15, a 1% shock to tax revenue (i.e., when taxes are suddenly changed) generates a reduced average impact of 0.036% on household poverty. In contrast, household poverty increases with shocks to government expenditure (i.e., when government expenditures are suddenly altered) in the short run, with an average impact of 0.022%. In other words, household poverty increases in the short run (years 2 to 4) and decreases in the medium to long run (years 5 to 15) with shocks to government expenditure. Similarly, the results show that shocks to tax revenue reduce income inequality (years 2 to11), and it increases the gap between the rich and the poor in the long run (years 12 to 15). Meanwhile, shocks to government expenditure increase the gap between the rich and the poor in the short to medium run (year 2 to 6) while decreasing the gap in the medium to long run (year 7 to15). The implication of these findings suggests that shocks to tax revenue directly benefit low-income families and individuals in Nigeria. Moreover, as unanticipated alteration of government expenditure increases household poverty and income inequality in the short run to medium run, any shock to government expenditure (internal or external) should be combated with pro-poor policy action.

Fiscal and Monetary Policy Interactions in Malawi: Evidence from Backward-Looking and Forward-Looking Approaches

Salim A. Mapila — 2024-11-30

The accommodation of fiscal profligacy by the Reserve Bank of Malawi (RBM) has long been an issue of concern among advocates for central bank independence in the country. This concern has over the years fuelled suspicions of fiscal dominance in the Malawian economy. Empirically, two traditional approaches have been used to distinguish between a fiscally-dominant regime and a monetary-dominant regime: the backward-looking and forward-looking approaches. Both approaches use the dynamic interrelation between public liabilities and primary surpluses to unearth this dominance relationship. Accordingly, this study employed the two approaches, using time series quarterly data spanning 2013:01-2024:01, to show that suspicions of fiscal dominance in Malawi are empirically exaggerated. On the contrary, the study found that the Malawian economy is predominantly characterised by a monetary-dominant regime – albeit with probable regime shifts to fiscal dominance at times. Such findings affirm the independence of the RBM and highlight its important role in working with the Ministry of Finance and Economic Affairs to create a conducive macroeconomic environment as emphasized in the national development vision – Malawi 2063. Particularly, the RBM is key in anchoring inflation expectations, promoting confidence in the currency, and fostering sustainable economic growth over the long term.

Effective Governance and Economic Development Issues in Nigeria’s Fiscal Federalism

Samuel Ochinyabo — 2024-11-30

The study examined Effective Governance and Economic Development issues in Nigeria’s Fiscal Federalism. This is on the premise that the issue of fiscal federalism has been contentious since pre-colonial period to the present day in all its ramifications; from jurisdiction and derivation, to the allocation to federating units. Unfortunately, these have been without recourse to the issues of effective governance and economic development of the country that should be at the core of the matter. The study adopted an ex-post facto research design and obtained data from secondary sources namely Central Bank of Nigeria, National Bureau of Statistics and World Bank publications. It employed the Econometric Structural Vector Autoregressive estimation technique for analysis. Findings of the study revealed that revenue allocation and expenditure by the federating units led to economic growth, but this did not transmit to economic development, the alleviation of poverty and the control of unemployment due to ineffective governance. So, the study makes the following recommendations; Poor leadership in the country can be strengthened by proper enforcement of rules by institutions and agencies of state in the country. Revenue and expenditure allocation to the tiers of government should be transparently accounted for. Also, efforts at increasing social investments should be enhanced and financial inclusion should be prioritized.

Exchange Market Pressure, and the Magnitude of Exchange Market Intervention Index in Nigeria

Abdulrahman Abdullahi Nadani — 2024-11-30

Using monthly data from January 2004 to December 2022 and the two-stage least squares (2SLS) method to estimate the money demand and price equation, this study constructs the exchange market pressure (EMP) and the intervention index for Nigeria by utilising the (Weymark, 1995) model. Findings indicate the value of the Naira is mostly under pressure to depreciate. Notwithstanding the monetary authority's intervention to pressures of appreciation or depreciation, the intervention index indicates absorption of the pressure by the exchange rate (EXR), which is in tandem with floating regime. Hence, the study agrees with the IMF's (2022) Exchange rate Arrangement for as well as Reinhart & Rogoff's (2004) exchange rate analysis for Nigeria. The analysis also revealed the anticipated (EXR) is more erratic than the actual exchange rate.

Covariates of Multidimensional Poverty in Nigeria

Idiaye C.O — 2024-11-30

This study examined the multidimensional poverty status of households in Nigeria using one of the most recent available household survey data, the 2018 Demographic Household Survey data. The data was analyzed using descriptive statistics, the fuzzy sets measures as well as the Tobit regression model. The results showed that 59.44% of the household heads were between 31 and 50 years of age with the mean age being 43.96 years, implying that most of the household heads were within their economically active years and, as such, should be less vulnerable to poverty than households with older heads. It also showed that the male gender, which is typically favoured over the female in terms of economic opportunities and, hence, is less vulnerable to poverty, accounted for 85.69% of the household heads. Also, 41.53% of the household head population had no formal education while 17.84%, 31.84% and 8.79% had primary, secondary and higher education respectively. This high proportion of household heads in the sample with no formal education as well as the generally low educational attainment presents a significant barrier to poverty alleviation Assets ownership influenced the poverty score of each household head as household heads with fewer assets tended to have higher poverty scores. Moreover, male headed households owned more assets than female headed households. The study concluded that other dimensions to poverty measurement in individuals and households, such as health, education and living standards, were as important as the monetary measures. It was recommended that in order to reduce poverty in households, basic social amenities, healthcare facilities and welfare support needed to be provided for households.

Sustainability and Financial Performance in Tanzanian Banks: Examining the Role of Environmental, Social, and Governance Factors and Influence of Digital Transformation

Zawadi Ally — 2024-12-09

This study investigates the impact of Environmental, Social, and Governance (ESG) practices and digital transformation on the financial performance of Tanzanian commercial banks. Using a Fixed Effect model to control for unobserved heterogeneity, the analysis covers data from 31 banks spanning 2014–2023. The findings indicate that ESG practices and digital transformation significantly enhance financial performance. A 1% increase in ESG practices improves return on assets (ROA) by 0.86% and Tobin’s Q by 0.56%, while a 1% rise in digital transformation expenditures enhances ROA by 0.12% and Tobin’s Q by 0.18%. Furthermore, the interaction between ESG and digital transformation yields synergistic performance gains, underscoring the importance of integrating sustainability with digital innovation. Larger banks and those with greater market share exhibit stronger performance, while economic growth positively influences the sector. This highlights the role of bank-specific characteristics and macroeconomic conditions in shaping financial performance. These findings extend Stakeholder Theory by illustrating how ESG practices align with diverse stakeholder interests and enrich the Resource-Based View by identifying digital transformation as a strategic asset. While the results are robust, the study is limited by its focus on Tanzanian banks, which may affect the generalizability of findings to other regions. The study offers actionable insights for policymakers and bank managers, advocating for regulatory support and investment in ESG and digital infrastructure to foster long-term value creation in the Tanzanian banking industry.

Building Resilience through Integrated Assistance: Evidence from the Democratic Republic of the Congo.

Atozou Baoubadi — 2024-12-10

Despite growing investment in resilience-building programs in conflict zones, limited empirical evidence exists on the effectiveness of integrated interventions in such contexts. This study examines the impact of a comprehensive resilience-building program in North Kivu, Democratic Republic of the Congo (2017-2019), focusing on community infrastructure, farmer associations, and land access. Using propensity score matching and difference-in-differences analysis of primary panel data from 1,643 households, our research reveals that integrated interventions significantly improved households' resilience capacity, primarily through enhanced market access and strengthened collective marketing systems. The program yielded a statistically significant positive impact on beneficiaries' access to land and participation in community associations, though impacts on agricultural production and food security were limited. These findings highlight the importance of context-specific, multifaceted approaches in enhancing resilience in areas facing protracted crises, particularly emphasizing market access and social cohesion. Our results provide valuable empirical evidence for policymakers and development practitioners, suggesting that resilience-building in conflict zones requires sustained, locally-adapted interventions that prioritize market linkages and community networks alongside traditional agricultural support.

Agriculture and Climate Change: Assessing Carbon Emissions from Diverse Agricultural Activities in Nigeria

Mutiu Gbade Rasaki — 2024-12-10

This paper examines the effects of diverse agricultural activities -crop production, fishing, livestock production and forestry- on carbon emissions in Nigeria. The study employs time-series data for the period 1990 to 2021 and applies Auto Regressive Distributed Lag (ARDL) estimation technique. The results reveal that agricultural activities significantly impact carbon emissions in Nigeria. The findings further reveal that livestock production and fishing activities increase emissions. However, the results show that crop production and forestry activities reduce emissions in Nigeria during the reference period. In the long run, a 1% rise in livestock production increases emissions by 0.09% and a 1% rise in fishing activities increases emissions by 0.57%. In contrast, a 1% expansion in crop production decreases emissions by 0.31% while a 1% expansion in forestry decreases emissions by 0.2%. Also, the estimates show that energy consumption has positive effect on emissions. Further, the results reveal that trade openness and FDI have positive effects on emissions while financial development reduces emissions in the long run. Thus, agricultural policies and strategies that explicitly combine mitigation of emissions with measures to improve food security and environmental outcomes in the agricultural sector should be promoted.

Can Credit Reference Bureaus Mitigate Commercial Banks’ Non-Performing Loans? Lesson from Tanzania

Atufigwege Jampion Mwakabalula — 2024-12-13

Creditors in Tanzania have been experiencing a problem of non-performing loans for a long time. Bank of Tanzania being the key regulator of financial sector confirmed the adoption of credit reference bureau in 2012 following the trust gained for these bureaus in addressing non-performing loans in different places around the world. The direction of this study is, therefore, to assess whether credit reference bureaus can mitigate commercial banks’ non-performing loans for the case of Tanzania. The study used panel data with in-depth information from all commercial banks in Tanzania. The results indicate that credit information pulled from credit reference bureau for credit decision is a good predictor of non-performing loans among commercial banks with a negative relationship. This suggests that information shared from credit reference bureaus have a wider possibility of reducing non-performing loans among commercial banks in Tanzania. On gauging the direct effects of information usage by commercial banks in mitigating credit risks, the study found that information about customers onboarding, screening loan applications, credit risk hedging, and loan repayment follow-ups relate negatively and significantly to non-performing loans. This outcome indicates that credit reference bureau is reliable in managing credit risks among commercial banks. Finally, the results show that bank specific factors particularly capital adequacy ratio and returns on assets significantly account for pronounced non-performing loans in Tanzania. Thus, to reduce non-performing loans Bank of Tanzania has to increase control of commercial banks in provision of credit services. Also, commercial banks have to work harmoniously with credit reference bureaus in exchanging and using credit information to reduce moral hazard and adverse selection. In addition, commercial banks must regularly evaluate their credit performance in relation to bank specific factors such as capital adequacy ratio and returns on assets.