i Gusau Journal of Accounting and Finance (GUJAF) Vol. 4 Issue 1, April, 2023 ISSN: 2756-665X A Publication of Department of Accounting and Finance, Faculty of Management and Social Sciences, Federal University Gusau, Zamfara State -Nigeria Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 ii © Department of Accounting and Finance Vol. 4 Issue 1 April, 2023 ISSN: 2756-665X A Publication of Department of Accounting and Finance, Faculty of Management and Social Sciences, Federal University Gusau, Zamfara State -Nigeria All Rights reserved Except for academic purposes no part or whole of this publication is allowed to be reproduced, stored in a retrieval system or transmitted in any form or by any means be it mechanical, electrical, photocopying, recording or otherwise, without prior permission of the Copyright owner. Published and Printed by: Ahmadu Bello University Press Limited, Zaria Kaduna State, Nigeria. Tel: 08065949711, 069-879121 e-mail: abupress2013@gmail.com abupress2020@yahoo.com Website: www.abupress.com.ng mailto:abupress2013@gmail.com Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 iii EDITORIAL BOARD Editor-in-Chief: Prof. Shehu Usman Hassan Department of Accounting, Federal University of Kashere, Gombe State. Associate Editor: Dr. Muhammad Mustapha Bagudo Department of Accounting, Ahmadu Bello University Zaria, Kaduna State. Managing Editor: Umar Farouk Abdulkarim Department of Accounting and Finance, Federal University Gusau, Zamfara State. Editorial Board Prof.Ahmad Modu Kumshe Department of Accounting, University of Maiduguri, Borno State. Prof Ugochukwu C. Nzewi Department of Accounting, Paul University Awka, Anambra State. Prof Kabir Tahir Hamid Department of Accounting, Bayero University, Kano, Kano State. Prof. Ekoja B. Ekoja Department of Accounting, University of Jos. Prof. Clifford Ofurum Department of Accounting, University of PortHarcourt, Rivers State. Prof. Ahmad Bello Dogarawa Department of Accounting, Ahmadu Bello University Zaria. Prof. Yusuf. B. Rahman Department of Accounting, Lagos State University, Lagos State. Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 iv Prof. Suleiman A. S. Aruwa Department of Accounting, Nasarawa State University, Keffi, Nasarawa State. Prof. Muhammad Junaidu Kurawa Department of Accounting, Bayero University Kano, Kano State. Prof. Muhammad Habibu Sabari Department of Accounting, Ahmadu Bello University, Zaria. Prof. Okpanachi Joshua Department of Accounting and Management, Nigerian Defence Academy, Kaduna. Prof. Hassan Ibrahim Department of Accounting, IBB University, Lapai, Niger State. Prof. Ifeoma Mary Okwo Department of Accounting, Enugu State University of Science and Technology, Enugu State. Prof. Aminu Isah Department of Accounting, Bayero University, Kano, Kano State. Prof. Ahmadu Bello Department of Accounting, Ahmadu Bello University, Zaria. Prof. Musa Yelwa Abubakar Department of Accounting, Usmanu Danfodiyo University, Sokoto State. Prof. Salisu Abubakar Department of Accounting, Ahmadu Bello University Zaria, Kaduna State. Dr. Isaq Alhaji Samaila Department of Accounting, Bayero University, Kano State. Dr. Fatima Alfa Department of Accounting, University of Maiduguri, Borno State. Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 v Dr. Sunusi Sa'ad Ahmad Department of Accounting, Federal University Dutse, Jigawa State. Dr. Nasiru A. Ka’oje Department of Accounting, Usmanu Danfodiyo University Sokoto State. Dr. Aminu Abdullahi Department of Accounting, Usmanu Danfodiyo University Sokoto, State. Dr. Onipe Adebenege Yahaya Department of Accounting, Nigerian Defence Academy, Kaduna State. Dr. Saidu Adamu Department of Accounting, Federal University of Kashere, Gombe State. Dr. Nasiru Yunusa Department of Accounting, Ahmadu Bello University Zaria. Dr. Aisha Nuhu Muhammad Department of Accounting, Ahmadu Bello University Zaria. Dr. Lawal Muhammad Department of Accounting, Ahmadu Bello University Zaria. Dr. Farouk Adeza School of Business and Entrepreneurship, American University of Nigeria, Yola. Dr. Bashir Umar Farouk Department of Economics, Federal University Gusau, Zamfara State. Dr Emmanuel Omokhuale Department of Mathematics, Federal University Gusau, Zamfara. State Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 vi ADVISORY BOARD MEMBERS Prof. Kabiru Isah Dandago, Bayero University Kano, Kano State. Prof A M Bashir, Usmanu Danfodiyo University Sokoto, Sokoto State. Prof. Muhammad Tanko, Kaduna State University, Kaduna. Prof. Bayero A M Sabir, Usmanu Danfodiyo University Sokoto, Sokoto State. Prof. Aliyu Sulaiman Kantudu, Bayero University Kano, Kano State. Editorial Secretary Usman Muhammad Adam Department of Accounting and Finance, Federal University Gusau, Zamfara State. Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 vii CALL FOR PAPERS The editorial board of Gusau Journal of Accounting and Finance (GUJAF) is hereby inviting authors to submit their unpublished manuscript for publication. The journal is published in two issues of April and October annually. 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PAYMENT DETAILS Bank: FCMB Account Number: 7278465011 Account Name: Gusau Journal of Accounting and Finance FOR INQUIRY The Head, Department of Accounting and Finance, Federal University Gusau, Zamfara State. elfarouk105@gmail.com +2348069393824 FOR MORE INFORMATION, CONTACT The Editor-in-Chief on +2348067766435 The Associate Editor on +2348036057525 OR visit our website on www.gujaf.com.ng or journals.gujaf.com.ng http://www.gujaf.com.ng/ http://www.gujaf.com.ng/ Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 ix CONTENTS Board Characteristics and Earnings Management of Listed Consumer Goods Firms in Nigeria Benjamin Gwabin Joseph, Murtala Abdullahi PhD, Benjamin Kumai Gugong PhD 1 Dividend Policy and Value of Listed Non-Financial Companies in Nigeria: The Moderating Effect of Investment Opportunity Abubakar Umar 18 Trialability and Observability of Accrual Basis International Public Sector Accounting Standards Implementation in Nigeria Aliyu Abdullahi Ahmed PhD, Zakari Usman 35 Liquidity Risk and Performance of Non-Financial Firms Listed on the Nigerian StockExchange Muhammed Alhaji Abubakar, Nurnaddia Binti Nordin PhD, Abubakar Hamisu Umar 54 Board Diversity, Political Connections and Firm Value: An Empirical Evidence from Financial Firms in Nigeria Rofiat Oyetunji, Isah Shittu PhD, Ahmed Bello PhD. 75 Moderating Effect of Bank Size on the Relationship between Interest Rate, Liquidity, And Profitability of Commercial Banks in Nigeria Shehu Usman Hassan, Bello Sabo (Ph. D), Ismai'l Idris Tijjani (Ph. D), Idris Ahmed Aliyu. (Ph. D) 96 Sources of Health Care Financing Among Surgical Patients Seen at the Dalhatu Araf Specialist Hospital Lafia Nasarawa State Nigeria Ahmed Mohammed Yahaya, Babatunde Joseph Kolawole, Bello Surajudeen Oyeleke 121 Transparency, Compliance and Sustainability of Contributory Pension Scheme in Nigeria Olanrewaju Atanda Aliu (Ph. D), Mohamad Ali Abdul-Hamid (Ph. D), Salami Suleiman (Ph. D), Salam Mudathir Olanrewaju 135 Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 x Examining the Impact of Working Capital Management on the Financial Performance of Listed Industrial Goods Entities in Nigeria 151 Sani Abdulrahman Bala (Ph. D), Jamilu Jibril, Taophic Olarewaju BAKARE Corporate Governance Factors and Tax Avoidance of Listed Deposit Money Banks in Nigeria 171 Sani Abdulrahman Bala (Ph. D), Umar Salim Ibrahim, Samaila Dannana Risk Committee Demographic Traits: A Study of the Impact of Expertise on Risk Disclosure Quality of Listed Insurance Firms in Nigeria Wada Najib Abbas, Dandago, Kabiru Isa (Ph. D), Rabiu, Naja’atu Bala 192 Moderating Effect of Audit Committee on the Relationship Between Audit Quality and Earnings Management of Listed Non-Financial Services Firms in Nigeria Ahmad Muhammad Ahmad, Lubabah Mansur Kwanbo (Ph.D.), Shehu Usman Hassan (Ph.D.) Musa Suleiman Umar (Ph.D.) 216 Determinants of Audit Opinion of Negative-Book-Value Firms in Nigeria: Firm Value and Audit Characteristics Perspective Asma’u Mahmood Baffa (Ph. D), Lawal Mohammed (Ph.D.), Ahmed Bello (Ph.D.) Umar Farouk Abdulkarim 237 Intervention Announcements and Naira Management: Evidence from the Nigerian Foreign Exchange Market Adedeji Daniel Gbadebo 254 Is There Earnings Discontinuity After the Implementation of IFRS in Nigeria? Adedeji Daniel Gbadebo 275 254 INTERVENTION ANNOUNCEMENTS AND NAIRA MANAGEMENT: EVIDENCE FROM THE NIGERIAN FOREIGN EXCHANGE MARKET Adedeji Daniel Gbadebo Department of Accounting Science Walter Sisulu University, Mthatha Eastern Cape, South Africa gbadebo.adedejidaniel@gmail.com ; agbadebo@wsu.ac.za Abstract Many studies establish how foreign exchange intervention affects the exchange rates. Intervention announcement do also have impact different for the actual financial involvement. Recent evidence has tested this for some countries but none has investigated Nigeria, despite volume of interventions and its announcements made via press circulars by the central bank. The paper applies daily data, from January 02, 2001 to May 15, 2023, to verify the impact of intervention announcements on the Nigerian exchange rate. The paper evaluates the relationship based on an event driven baseline specification, which measure the impact of announcement period windows on the exchange rate. The paper finds conclusive evidence of highly significant impacts that past, contemporaneous and future intervention announcements cause appreciation shocks. The naira is revealed to appreciate by 3.5% upon the intervention announcement, and this further increases to 4.49%, 4.55% and 5.22%, on one day, two day, three days after, but subsequently slow down on fourth day (5.21%) and fifth day (3.45%) after the intervention announcements. Robustness test based using alternative data frequency for the estimation yields close (different) result for the monthly (quarterly) periodicity, therefore supposes that the data frequency matters. The result has implications for future conduct of interventions and conventional monetary policies. Amongst others, higher market uncertainty, low credibility of transmission mechanism and possible predominance of global over the national factors may contribute to influences the effectiveness of interventions. The paper’s major limitation is that it excludes the influence of actual intervention, via sales and purchases of dollar, by the central bank. Keywords: Intervention Announcements, Naira Management, Nigerian Foreign Exchange Market https://doi.org/10.57233/gujaf.v4i1.210 1. Introduction Foreign exchange (FX) intervention occurs when government via the central bank, buys or sells foreign currencies to prevent equilibrium exchange rate. The authorities intervene in foreign currency markets to pursue a monetary target and/or to smooth excessive exchange rate volatility triggered by speculative attacks. Most central banks make the announcement of planned interventions by means of press information (Fratzscher, 2008; Germaschewski et al., 2020; Parra-Polania et al., 2022). Recent evidence reveals how intervention announcements carry information contents that moderate exchange rate levels. Germaschewski et al. (2020) and Fratzscher (2008) reveal that oral FX interventions have been effective to influence different exchange rates. Fratzscher (2008) finds that over the short- to medium run, oral intervention events are highly successful in influencing the exchange rate mailto:gbadebo.adedejidaniel@gmail.com mailto:agbadebo@wsu.ac.za Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 255 of the dollar-yen and euro-dollar. Germaschewski et al. (2020) note that the announcements can impact output via the exchange rate depreciation and an unexpected increase in oral interventions may significantly weaken the Australian dollar. Evidence for Nigeria indicates that the naira has depreciated since 1980 till date. The currency keeps wobbling against global currency and more so, its peers in Africa: Reports indicate that the naira depreciated against other global currencies between October 2015 and October 2022 (Central Bank of Nigeria, CBN Bulletin, 2022; Business Day, 2022). The naira depreciated by 122% against the dollar, from an average of N196.5/$ to N436.78/$. The currency which exchanges at N301.7/£ (N216.6/€) depreciated by 63% (98 %) to N491.68/£ (N428.66/€) against sterling (euro). The depreciation against the Yen (Yuan) was 79% (94%). Relative to other African currencies, the naira depreciated in same periods against the CFA (WAUA) by 102% (104%) from N0.32 to N0.64 (N273.06 to N556.39). In curtailing the incessant naira depreciation, the monetary authorities have implemented several exchange rate management approaches (CBN, 2021; Mordi, 2006; Obadan, 2006; Ukeje, 2017). The Nigerian naira has remained excessive volatile since adoption for use in 1970, and the monetary authority, the central bank of Nigeria (CBN), has often watched the movements of the exchange rate and intervene in event of severe and unanticipated market fluctuations. The bank may intervene by announcements that ease foreigners’ decision to transact in domestic assets to cause the domestic currency appreciation. The authority initially circulates news information to intervene, which often elicited reactions from market participants (Gbadebo et al., 2021). Subsequently, implements the planned intervention (mostly to sell the dollars to correct depreciatory shock), action which financed from the reserve (Ahmed et al., 2020; Dayyabu et al., 2016; Omojolaibi & Gbadebo, 2014). In 2020 the central bank completes a pseudo devaluation by making adjustment to unify the importer and exporter transaction windows in order to slow down pressure on the foreign reserves due to FX shortage (Gbadebo et al., 2021). Despite the foreign exchange spent by the CBN in intervening to defend the naira and convince the market that the authority was resolute about halting the excessive naira’s rally beyond fundamental have not yielded result as the naira continues to depreciate yearly. Current intervention studies based on evidence from Nigeria concentrate on influence of actual financial interventions, as well as focus mostly on exchange rate volatility (Adebiyi, 2007; Ahmed et al., 2020; Akbar, 2016; Aruwa & Ahmed, Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 256 2013; Dayyabu et al., 2016; Omojolaibi & Gbadebo, 2014). No study for Nigeria has considered the announcements impact despite the importance (Germaschewski et al., 2020; Parra-Polania et al., 2022). Understanding why intervention announcements affect the exchange rate an important issue for policy considerations. Because intervention is aimed at targeted exchange rate reference, this paper supposes a paradigm shift to focus on the impact of intervention announcements on exchange the rate in Nigeria. The paper extends literature by pursuing two objectives. First, the paper finds out whether intervention announcement affects the exchange rate level. The paper follows literature to apply daily data on event driven models and show how exchange rate responds to announcements (Cheung et al., 2019; Fratzscher, 2008; Germaschewski et al., 2020; Parra-Polania et al., 2022; Pyo & Lee, 2020). Since the efficacy of intervention announcement is unrelated to implemented monetary policy but works via the coordination channel (Fratzscher, 2008), the current paper focuses on the events for the naira caused by announcements without the influence of monetary policy (Ponomarenko, 2019) and exogenous macroeconomic factors (Alder et al., 2019; Blanchard et al., 2015; Hoshikawa, 2017). Second, since the data frequency for intervention may impact the outcome (Adler et al., 2021), the paper in line with prior studies on exchange rate and other financial variables verifies how periodicity influence the outcome (Gbadebo et al., 2022; Salisu & Vo, 2021). The robustness is examined for available monthly and quarterly frequency data. The paper finds conclusive evidence of highly significant impacts that past, contemporaneous and future intervention announcements cause appreciation shocks. This has significant policy relevance as it offers valuable addition to monetary policy. Although FXI is occasionally applicable for Nigeria, the continuous depletion in the reserve has reduced the volume, and the naira remains volatile. Other parts of the work are organized as: Section 2 presents the literature review, and Section 3 the methodology. Section 4 presents the results, while section 5 concludes. 1. Literature Foreign exchange (FX) intervention occurs when government via her representative, the central bank, buys or sells foreign currencies to influence exchange rates. The central bank interferes in the FX market, by intervention operations, in order to push the exchange rate away from prior equilibrium. If the monetary authority considers that the exchange rate deviates excessively from the expected fundamental, it buys the domestic currency during periods of depreciatory Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 257 pressures and vice versa. There is evidence that intervention is more regular in emerging than in advanced economies (Parra-Polania et al., 2022; Frömmel & Midiliç, 2022; Adler & Mano, 2021; Akdogan, 2020; Ponomarenko, 2019; Disyatat & Galati, 2005). In floating exchange rate system, the demand and supply of foreign exchange by private agents determine the equilibrium rate. Because private agents may push the rate to fluctuate beyond the equilibrium required for external stability, the central bank often intervene to curtail excessive swings. To curtail the undue fluctuations and consequences, governments of advanced economies and their developing counterparts officially guide the exchange rates through official intervention. Three immediate objectives of intervention include to dampen exchange rate volatility, to influence exchange rate level and to manage the foreign reserves. Aside these, central banks intervene in forex markets in order to maintain competitiveness, control inflation and sustain financial stability (Gagnon, 2012). Literature contains five channels via which intervention affects the exchange rates. The monetary channel explains that intervention influence the exchange rate through the interest rates. This is possible because the government offsets he effects of intervention on the domestic bank reserves. The portfolio channel, suggested by Branson (1983), explains that intervention influence exchange rate through asset prices. The model assumes that sterilized intervention adjusts investor’s portfolio composition, or the riskiness of foreign denominated assets in relation to the domestic currency assets, which influence the exchange rate if there is existence of imperfect asset substitutability. This channel is more relevant in emerging market countries, where the interventions play major role in domestic markets. The signalling channel, from MuNigeria (1981), argue that intervention contains information about the future of monetary policy. Hence, a change in expected interest rates would impact the exchange rate. The channel requires that the central bank backs interventions with the expected change in policy. The fourth channel, the market microstructure channel, contains that intervention influences the exchange rate due to informational asymmetric. Because intervention can cause significant impact on order flows, the central bank affect market expectation about the future path of exchange rate (Dominguez, 1999; Hung, 1997). The fifth medium is the ‘coordination’ channel (Tapi & Tokman, 2004). Here, intervention affect exchange rate and its volatility by perforating the irrational speculative bubbles because of possible coordination failure and realigning any disequilibria in the exchange rate. Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 258 Intervention can be nonsterilised and sterilised. Intervention is nonsterilised or unsterilized if it causes a shift in the monetary base. The unsterilized intervention is conducted by the monetary authorities if the purported aim of the intervention is to influence the exchange rate without trading domestic assets (Ponomarenko, 2019; Omojolaibi & Gbadebo, 2014). This affects the exchange rate via its effect on money supply by changing interest rates in the domestic economy. In general, any intervention that is nonsterilised will have effects on domestic money supply growth. Nonsterilised intervention is crucial because it induces changes in monetary base, affect interest rates, expectations, capital flows and consequently, exchange rate. The general usage of such intervention is such that it simultaneous pursuit of exchange rate and monetary policy operations. Sterilized intervention may not have substantial effect on domestic money supply growth. There are debates about FX intervention’s effectiveness and efficiency. A smooth transmission channel matter for intervention to be effective. Almudhaf (2014) finds that unlike the exchange rates of South Africa, Colombia, Indonesia and Turkey that are efficient, the exchange rates of Egypt and Vietnam were inefficient. Kumar (2015) reveals that although the market was inefficient, but that efficiency was attained and improved after the crisis. The efficiency is improved because of foreign exchange interventions. Ning et al. (2017) find that the pre-reform market was more efficient relative to the post-reform. The decline in the market efficiency level is because of the various interventions by the People’s Bank of China since the reform. Khuntia et al. (2018) identifies that the efficiency in the currency’s market had fluctuated because of various events including financial crises, legal reforms, institutional structures, central bank actions, macroeconomic fluctuations, and political instability. Diniz-Maganini et al. (2023) find substantial differences in the efficiency of the countries, with China the least efficient and South Africa the most efficient. 2. Methodology Considered Model In assessing the influence of intervention announcements on the USD/NGN exchange rate, the paper focuses on the interventions periods, in which the pre- actual intervention announcements are made through the press publication on the CBN website. The paper estimates the effects of past, current and lead of announcement periods on log-exchange rate. According to Pyo and Lee (2020) and Ben-Omrane et al. (2019), the paper reports an event driven model that analyses how the intervention announcements on five days windows prior (𝑡 − 𝑖, 𝑓𝑜𝑟 𝑖 =−1 𝑡𝑜 − 5), day of announcement (t), and post (𝑡 + 𝑖, for 𝑖 =1 to 5), explain Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 259 exchange rate levels. The paper specifies a baseline model that considers the stable’ effects of intervention news on exchange rate given as: 𝐿𝑜𝑔( 𝑈𝑆𝐷 𝑁𝐺𝑁 )𝑡 = 𝛼0 + ∑ 𝛽𝑡+𝑖 5 𝑖=−5 𝐹𝑋𝐼𝑁𝑇𝑉𝐷𝑢𝑚𝑡+𝑖 + 𝜀𝑡 (1) 𝐿𝑜𝑔(𝑈𝑆𝐷/𝑁𝐺𝑁)𝑡 = 𝛼0 + ∑ 𝛽𝑡+𝑖 −1 𝑖=−5 𝐹𝑋𝐼𝑁𝑇𝑉𝐷𝑢𝑚𝑡+𝑖 (1’) + 𝛽𝑡 𝐹𝑋𝐼𝑁𝑇𝑉𝐷𝑢𝑚𝑡 + ∑ 𝛽𝑡+𝑖 5 𝑖=1 𝐹𝑋𝐼𝑁𝑇𝑉𝐷𝑢𝑚𝑡+𝑖 + 𝜀𝑡 Equation (1) estimate the log transformation of the daily USD/NGN’s exchange rate on the announcement dummies for FX intervention press releases. Equation (1’) is a convenient way to write (1) for table presentation. The log-normalization is used in the empirical estimations to secure suitable estimates (Lahmiri et al., 2018). Unlike the daily data, the study considers 2, 3, and 4 quarters, months and weeks periods effects windows for the respective frequency identifies because of limited data. The explanatory variables (i.e., the 𝐷𝑡+𝑖’s) are dummies identified as 1 for the announcement (immediate) time and 0 otherwise. 𝐷𝑡+𝑖, 𝑖 𝜖 {−5, −4, −3, −2, −1,0, 1, 2, 3, 4, 5} for the daily estimation involves lagged by i (past and future) days from the announcement. Based on standard events models (Gbadebo et al., 2021; Pyo & Lee, 2020), 𝑣𝑎𝑟(𝜀𝑡 ) (i.e., variance of error) follows the Generalized Autoregressive Conditional Heteroskedasticity (GARCH(1,1)) [(2)], hence, the paper finds whether the t-test for the variance of GARCH(1,1) of 𝜀𝑡 of the exchange rate (1) is significant: 𝜀𝑡 = δ + 𝜎𝑡 𝑧𝑡 𝑧𝑡 ~ 𝑛𝑖𝑑 (0,1), ∀ 𝑡 (2) 𝜎𝑡 2 = 𝜔0 + 𝜔1(𝜀𝑡−1) 2 + Ω𝜎𝑡−1 2 𝜎𝑡 2 > 0 The intercepts 𝛼0 indicate the expected value of the naira when no announcements released, and expectedly, is non-negative. The coefficient 𝛽𝑡+𝑖 (for 𝑖 = 1 𝑡𝑜 𝑘) corresponding to each 𝐷𝑡+𝑖 measures change in the mean level of the exchange rate, provided that intervention announcement is released time t for each i lag. 𝛽𝑡+𝑖 > (<) 0 supposes that the mean exchange rate of naira is would be expected to depreciate (appreciate) by approximately 𝛽𝑡+𝑖 (times 100 percent for that particular period i's announcement. Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 260 Data and Basic Statistics For intervention announcements, the paper employs dummy variables for reported dates of official press release related to intervention announcements by the CBN within the considered period is used. The announcements are scrapped on CBN webpage from the various press release from January 02, 2001 to May 15, 2023. Table A1 and Table A2 report, with their links, the considered releases. The paper includes announcement dates involving direct intervention and others with information content relating to FX transactions such as guidelines and instructions for BDCs, which are all targeted to moderate the exchange rate undulations. This is important because of the peculiar nature of the Nigerian FX market, in which the naira is sensitive to increase reserves (Kalu et al., 2019); financial assets (Bala-Sani & Hassan, 2018; Oladapo et al., 2017) and FX intervention (Adebiyi, 2007; Ahmed et al., 2020; Akbar, 2016; Aruwa & Ahmed, 2013; Dayyabu et al., 2016; Omojolaibi & Gbadebo, 2014). The paper scrutinizes the webpage reports and secure circulars involving direct intervention via the Wholesales Dutch Auction System (WDAS), Dutch Auction System Retail (RDAS) and special intervention for Bureau de Change (BDCs), which are all geared towards exchange rate stabilization. The RDAS was suspended in Feb 18, 2015 but since March 3, 2015, the authority makes special FX intervention through sales of FX to the BDCs. Hence, the paper involves all announcements on FX sales to BDCs to consolidate the RDAS. A total of 264 releases at distinct days are obtained and conjectured as intervention dummy, which is denoted as 1 on announcement day for categorized released announcements, and 0 otherwise. For the other series (monthly and quarterly), the paper shares the sentiment to apply dichotomy variable for intervention announcements. Thus, the dummy is used to represent the week, month or quarter which intervention news is released rather than to use discrete variable involving to sum up all days of intervention for the considered periodicity. This approach is applied in order to have a fair comparison with the estimation for the daily series. For exchange rates, the data applied is the daily, monthly and quarterly naira price of the US dollar (i.e., USD/NGN rate), from January 02, 2001 to May 15, 2023. The series was sourced from the CBN online bulletin. The CBN-rate, been the average of the bid-ask price quotes, is used. The data published does not include weekends and slated national holidays, due to inherent bias influence the transactions for these days would have on the quoted prices. The plots of the daily exchange rate in level (Figure 1) and log-transform (Figure 2 (black line)) are chaotic with jumps and vertical striations, clearly, due to regime Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 261 switches, announced devaluations and volatility drifts. Within closer periods, the daily CBN-rate for naira appears stable around same domain between the days except for periods of jumps. The series are nonlinear, although the log transform is relatively smoothened. Figure 3 depicts the breakdown of the exchange rate (log form) with the Seasonal-Trend decomposition using LOESS (STL) into different time-series components. The plot identifies that the Although trend component remains explosives, the remainder convergent and mean reversing, and the seasonality oscillatory but stable around a zero mean. Figure 1: Time series plots of the daily USD/NGN exchange rate (actual data) Figure 2: Time series plots of the daily USD/NGN exchange rate (log-transform data) Note: The daily naira price of the US dollar (i.e., USD/NGN rate), from January 02, 2001 to May 15, 2023, is shown in Figure 1 and 2. Figure 2 includes a fitted polynomial trend (Brown line). Source: Author (2023) Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 262 Figure 3: Seasonal-Trend decomposition using LOESS (STL) for the log of USD/NGN rate. Note: The STL breakdown of USD/NGN rate into different time-series components. The trend component remains explosives, the remainder convergent, and the seasonality oscillatory but stable around a zero. Source: Author (2023) Table 1: Statistical properties of the exchange rate Statistics 𝑈𝑆𝐷/𝑁𝐺𝑁𝑡 log (𝑈𝑆𝐷/𝑁𝐺𝑁)𝑡 𝜇 210.831 2.278 𝑚𝑒𝑑𝑖𝑎𝑛 155.240 2.191 𝑚𝑎𝑥𝑖𝑚𝑢𝑚 461.000 2.664 𝑚𝑖𝑛𝑖𝑚𝑢𝑚 112.950 2.053 𝜎 103.214 0.192 �̃�3 0.963 0.669 �̃�4 2.461 1.869 𝐽𝐵-stat. 872.32 668.8 𝑝(𝐽𝐵-stat.) 0.000 0.000 Note: Table 1 provides the basic statistics, including the mean (𝜇), median (𝑚𝑒𝑑), standard deviation (𝜎), skewness (𝜇3) and kurtosis (𝜇4) coefficients, of the exchange rates (𝑈𝑆𝐷/𝑁𝐺𝑁𝑡, and the log transformed Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 263 series. 𝑝(JB stat) is the probability of Jarque-Bera (JB) used for the normality test for each series. 𝜎 is standard deviation. Source: Author (2023) Table 1 reports the basic statistical characterization for the exchange rate and the log series. The mean (standard deviation) for the naira exchange rate series is NGN210.831 (103.214). The evidence indicates that the exchange rate has high spread. The exchange rate distribution is asymmetric (positive skewed) and mesokurtic (moderate peaked). The Jarque-Bera test shows that the series is significant, rejecting stated normality null. The series indicate outliers that could generate heteroskedastic because the distribution is very leptokurtic and rightly skewed. The log transformation is adopted for empirical verification of the considered impact of intervention announcement on the daily exchange rates, in order to present standardized scale and interpret the estimates in percent appreciation or depreciation change. 4. Results and Interpretations Does FX intervention announcements cause appreciation or depreciation impacts? The study offers attempt to answer the pertinent objective question on how intervention announcements affect the exchange rate level in the Nigerian FX market. Because the purpose is purely to establish how announcement events impact the asset price (i.e., FX), the empirical estimation conjectures that the announcement works in the market via the coordination channel. Thus, according to literature (Cheung et al., 2019; Germaschewski et al., 2020; Parra-Polania et al., 2022; Pyo & Lee, 2020) the study applies the daily naira price of dollar on event explainable model (equation 2). The estimation shows how announcements alongside its expectations days before and after the news release drive the exchange rate level without accommodating the influence of exogenous macroeconomic interdependence (Alder et al., 2019; Blanchard et al., 2015 Hoshikawa, 2017), such as monetary policy interaction (Omojolaibi & Gbadebo, 2014; Ponomarenko, 2019). Table 2 reports how log of the 𝑈𝑆𝐷/𝑁𝐺𝑁𝑡 clusters around intervention announcements, without the influence of actual financial involvement by the authority. The estimation process after adjustments due to iterations reflects around 5,231 observations. The naira exchange rate is well driven by the central bank’s interventions announcement according to the long run stable estimates. The evidence, according to the intercept (𝛼0) shows that the anticipated value of the Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 264 exchange rate is about 2.3459 (log-form) or NGN210.83 per dollar, if the central bank would not make announcement via circular related intervention to stabilise the naira in the FX market. The past, contemporaneous and future upon the intervention announcement cause appreciation shocks. The estimates 𝛽𝑡+𝑖 (𝑓𝑜𝑟 − 5, −4, … , 4, 5) are all negative and significant, therefore expresses that the mean of the 𝑈𝑆𝐷/𝑁𝐺𝑁𝑡 rate appreciates on the WDAS/RDAS/BDCs intervention announcement expectations for some days, upon the announcement and even day after FX auctions. The evidence is not surprising because most exchange rate management in the country has been often gear to stabilise the volatile FX price from short run excessive swings in Nigeria (CBN, 2022, Gbadebo et al., 2021). The naira is expected to appreciate by 3.5% upon the intervention announcement but the naira appreciation would further increase to 4.49%, 4.55% and 5.22%, on one day, two day, three days after, but would subsequently and not surprisingly slow down on fourth day (5.21%) and fifth day (3.45%) after the intervention announcements by the central bank. The combined impact, of the announcement expectation and after, on the exchange rate is significant as well the overall model is robust and fit for policy significance. The finding is justifiable since the CBN’s announcement of intervention, which unusually involves sales of the US dollars to the BDCS conveys information that provide signal which prevents possible FX hoarding, and makes market participant to bid at lesser price, and seller to accept, due to expected release of dollars into the FX market by the central bank. The increase in forex in circulation definitely pushes appreciation pressure. Although, the efficacy of the announcement intervention may not be directly related to implemented monetary policy (Fratzscher, 2008), but the precise degree of appreciation effect may depend on existence of credible monetary transmission medium. Also, higher uncertainty levels in the market, low credibility of transmission mechanism and possible predominance of global over the national factors are amongst factors that contribute to influences the effectiveness of interventions in the economies. They counter pressure exchange rate by impinging lopsided potentials about expected interventions and the naira future value. Improved digitalized FX and financial system, such as increase financial instruments, may facilitate intermediation that can promote effective mechanism for the intervention announcement to transmit coordinately with other macroeconomic policies to help stabilise the naira and attain targeted value. This is because such would attract more capital inflows and increase the reserve, which is needed to help stabilized the naira or make the currency to appreciate. Table 2 Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 265 presents the estimated change in the naira appreciation rate between days. The outcome identifies continuous appreciation from the intervention announcement day up to the day three. The evidence is inconsistent with other studies that show how assets prices, such as global stock respond to macroeconomic news in the US (Lucca & Moench, 2015). Ekincia et al. (2019) show appreciation impact of news announcement on the bid, ask and mid-prices in post-release period. This result is consistent and collaborates established evidence, including research on intervention for G3 exchange rates based on events models (Hussaina & Ben-Omrane, 2020; Fatum & Hutchison, 2005. Hussaina and Ben-Omrane (2020) find that the US macroeconomic releases impose significant influence on the market returns in Canada. Table 2: Estimated event driven model for daily exchange rate 𝑈𝑆𝐷/𝑁𝐺𝑁𝑡 = 𝛼0 + ∑ 𝛽𝑡+𝑖 5 𝑖=−5 𝐹𝑋𝐼𝑁𝑇𝑉𝐷𝑢𝑚𝑡+𝑖 + 𝜀𝑡 Variable 𝑃𝑎𝑟𝑎𝑚𝑒𝑡𝑒𝑟 Estimate 𝜎 𝑡-stat p-𝑣𝑎𝑙𝑢𝑒 𝐼𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 𝛼0 2.3459* 0.0030 787.61 0.0000 FXINTVDum𝑡−5 𝛽𝑡−5 -0.0326* 0.0098 -3.3339 0.0009 FXINTVDum𝑡−4 𝛽𝑡−4 -0.0499* 0.0101 -4.9345 0.0000 FXINTVDum𝑡−3 𝛽𝑡−3 -0.0501* 0.0101 -4.9551 0.0000 FXINTVDum𝑡−2 𝛽𝑡−2 -0.0438* 0.0103 -4.2491 0.0000 FXINTVDum𝑡−1 𝛽𝑡−1 -0.0436* 0.0103 -4.2313 0.0000 FXINTVDum𝑡 𝛽𝑡 -0.0353* 0.0110 -3.1957 0.0014 FXINTVDum𝑡+1 𝛽𝑡+1 -0.0449* 0.0103 -4.3563 0.0000 FXINTVDum𝑡+2 𝛽𝑡+2 -0.0455* 0.0103 -4.4142 0.0000 FXINTVDum𝑡+3 𝛽𝑡+3 -0.0522* 0.0101 -5.1599 0.0000 FXINTVDum𝑡+4 𝛽𝑡+4 -0.0521* 0.0101 -5.1492 0.0000 FXINTVDum𝑡+5 𝛽𝑡+5 -0.0345* 0.0098 -3.5221 0.0004 Variance (𝜎𝑡 2) Equation 𝐼𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 𝜔0 0.0000 0.0000 52.8249 0.0000 (𝜀𝑡−1) 2 𝜔1 1.1670 0.0386 30.2273 0.0000 𝜎𝑡−1 2 Ω 0.1622 0.0142 11.4254 0.0000 Statistics �̅�2 0.2091 F-stat. 125.32* Prob(F-stat.) 0.0000 DW-stat. 2.0042 Note: σ, t-stat, p-value, and DW-stat are the standard error, t-statistics and probability of t value, and Durbin Watson statistic respectively. * implies significant t 1% Source: Author (2023) Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 266 Table 3: Estimated change in naira appreciation rate between days Variable 𝑃𝑎𝑟𝑎𝑚𝑒𝑡𝑒𝑟 Estimate %CAR* FXINTVDum𝑡−5 𝛽𝑡−5 -0.0326 NA FXINTVDum𝑡−4 𝛽𝑡−4 -0.0499 53.10% FXINTVDum𝑡−3 𝛽𝑡−3 -0.0501 0.40% FXINTVDum𝑡−2 𝛽𝑡−2 -0.0438 - 12.74% FXINTVDum𝑡−1 𝛽𝑡−1 -0.0436 -0.36% FXINTVDum𝑡 𝛽𝑡 -0.0353 - 19.14% FXINTVDum𝑡+1 𝛽𝑡+1 -0.0449 27.33% FXINTVDum𝑡+2 𝛽𝑡+2 -0.0455 1.27% FXINTVDum𝑡+3 𝛽𝑡+3 -0.0522 14.87% FXINTVDum𝑡+4 𝛽𝑡+4 -0.0521 -0.19% FXINTVDum𝑡+5 𝛽𝑡+5 -0.0345 - 33.87% Note: * Change in the appreciation rate of daily naira exchange rate. NA: Not applicable. Source: Author (2023) Is the estimation sensitive to the nature of data frequency? Here, the study attempts to know whether the estimation would change significantly upon use of a different data frequency for the high frequency naira rate. The paper appraises the soundness reposed in the previous findings using different frequency of the exchange rate, as demonstrated by some empirical analyses that the nature of data frequency matter (Gbadebo et al., 2022; Narayan & Liu, 2015; Narayan & Sharma, 2015; Salisu & Adeleke, 2016). The previous analysis is replicated for monthly (quarterly) data frequency and the estimates are presented in Table 4 (Table 5). Interestingly, the results for the monthly frequency supposes similar evidence with the previous. Most of the estimates remains significant and the overall model remains significant as with the daily data estimation. However, because monthly data supposes a relatively longer time than usual day announcement, the overall effect is depreciatory. All the intervention announcement coefficients 𝛽𝑡+𝑖, for the various months are positively signed, hence, would cause exchange rate depreciation. The disseminated releases on intervention are significant at 1 to 10% level, identifying the exchange rate to depreciate by 6.57% on the month of Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 267 announcement, and by 7.85%, 6.36% and 4.16% on three, two and one month, respectively, after the announcement. The case for the quarterly data shows dissimilar outcomes. The estimates for the different announcement quarters and the overall model are not significant, although, like with the monthly data, the dummies for intervention, supposes depreciation on the expectation of released WDAS/RDAS auction on the quarter before, current quarter and quarter after announcements. Upon the intervention in the quarter, the exchange rate would depreciate by approximately 3.55%, on the quarter of announcement, and by 2.77% and 1.8% on three, two and one quarter, respectively, after the announcement. This is not surprising because quarterly data conveys medium run information, and for the Nigeria, curtailing exchange rate undulation has often only been attained temporarily, and in particular, within first quarter of policy implementations. The appreciation tendency seems within the immediate periods of the announcement, whereas in short- and long run, the depreciations is more likely. This probably explains the reasons various exchange rate management approaches by the government, in the considered periods, remains unsuccessful in curtailing the depreciation as the continues to wobble. Table 4: Estimated event driven model for monthly frequency Variable 𝑃𝑎𝑟𝑎𝑚𝑒𝑡𝑒𝑟 Estimate 𝜎 𝑡-stat p-𝑣𝑎𝑙𝑢𝑒 𝐼𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 𝛼0 2.1677* 0.0187 115.67 0.0000 FXINTVDum𝑡−3 𝛽𝑡−3 0.0346** 0.0318 1.0865 0.2782 FXINTVDum𝑡−2 𝛽𝑡−2 0.0479** 0.0330 1.4506 0.1481 FXINTVDum𝑡−1 𝛽𝑡−1 0.0675*** 0.0296 2.2763 0.0236 FXINTVDum𝑡 𝛽𝑡 0.0657*** 0.0304 2.1641 0.0314 FXINTVDum𝑡+1 𝛽𝑡+1 0.0787* 0.0296 2.6559 0.0084 FXINTVDum𝑡+2 𝛽𝑡+2 0.0636*** 0.0329 1.9350 0.0541 FXINTVDum𝑡+3 𝛽𝑡+3 0.0416** 0.0315 1.3203 0.1879 Statistics �̅�2 0.1336 F-stat. 5.8167* Prob(F-stat.) 0.0000 DW-stat. 1.0147 Note: The statistics – σ, t-stat and p-value the standard error, t-statistics and probability of t value, respectively. *, **, ***, implies significant t 1%, 5%, 10% Source: Author (2023) Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 268 Table 5: Estimated event driven model for quarterly frequency Variable 𝑃𝑎𝑟𝑎𝑚𝑒𝑡𝑒𝑟 Estimate 𝜎 𝑡-stat p-𝑣𝑎𝑙𝑢𝑒 𝐼𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 𝛼0 2.2237 0.0402 55.332 0.0000 FXINTVDum𝑡−3 𝛽𝑡−3 0.0142 0.0522 0.2718 0.7865 FXINTVDum𝑡−2 𝛽𝑡−2 0.0219 0.0541 0.4056 0.6862 FXINTVDum𝑡−1 𝛽𝑡−1 0.0374 0.0522 0.7168 0.4757 FXINTVDum𝑡 𝛽𝑡 0.0355 0.0526 0.6759 0.5011 FXINTVDum𝑡+1 𝛽𝑡+1 0.0277 0.0526 0.5271 0.5996 FXINTVDum𝑡+2 𝛽𝑡+2 0.0182 0.0537 0.3399 0.7349 FXINTVDum𝑡+3 𝛽𝑡+3 0.0077 0.0515 0.1505 0.8808 Statistics �̅�2 0.0158 F-stat. 0.1794 Prob(F-stat.) 0.9888 DW-stat. 0.0172 Note: The statistics – σ, t-stat and p-value the standard error, t-statistics and probability of t value, respectively. *, **, ***, implies significant t 1%, 5%, 10% Source: Author (2023) 5. Conclusion Policymakers, and in particular, the central banks, are often committed to intervention in FX market in order to moderate the magnitude and pace of their domestic currency fluctuations and volatility. Due to the impacts, some central banks make the announcement of planned interventions by means of press released information. Recent evidence reveals how such intervention announcements transmit information contents that moderate exchange rate value (Parra-Polania et al., .2022; Germaschewski, Horvath & Zhong, 2020). Since 1980 till date, the Nigerian naira has kept wobbling against global currency and more so, its peers in Africa, despite several exchange rate management approaches implemented by the CBN to curb the incessant depreciation (CBN, 2021; Gbadebo et al., 2021; Mordi, 2006). Some studies have been investigated on operations in the FX market, particularly related to determinant of exchange rate (Kalu, et al. 2019; Bala-Sani & Hassan, 2018; Oladapo et al., 2017), while other evidence reports how actual FX intervention impact the exchange rate (Ahmed et al., 2020. Dayyabu, Adnan & Sulong, 2016; Akbar, 2016; Omojolaibi & Gbadebo, 2014). However, there is no available study that has considered the influence of the Gusau Journal of Accounting and Finance, Vol. 4, Issue 1, April, 2023 269 central bank announcements on the naira exchange rate, therefore, the current paper fills this gap. This paper pursues two objectives – The first conforms whether the intervention announcement affects the exchange rate level, and the second confirms whether the frequency of the data explore maters for the conclusion. The event driven model, from standard literature, is applied to establish the aims. According to the baseline specification, the paper finds conclusive evidence of that pasts, contemporaneous and future intervention announcements significant cause appreciation shocks. According to the daily data utilized for the main analysis, the naira is expected to appreciate by 3.5% upon announcement, and this further increases to 4.49%, 4.55% and 5.22%, on one day, two day, three days after, but slowdown in subsequent days after the intervention announcements. Robustness test based using alternative data frequency for the estimation yields close (different) results for the monthly (quarterly) periodicity, supposing that frequency matters. They counter pressure exchange rate by impinging lopsided potentials about expected interventions and the naira future value. Improved digitalized FX and financial system, such as increase financial instruments, may facilitate intermediation that can promote effective mechanism for the intervention announcement to transmit coordinately with other macroeconomic policies to help stabilise the naira and attain targeted value. This is because such would attract more capital inflows and increase the reserve, which is needed to help stabilized the naira or make the currency to appreciate. Since the Nigerian economy and FX market is integrated in the global financial system, the paper recommends the central bank should implement policies to largely hold more foreign exchange in the reserves in order to have sufficient fund to intervene aggressively to prevent excessive depreciation of the naira. The result has implications for future conduct of interventions and conventional monetary policies. 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