Journal of Financial Regulation and Compliance, Jan 26, 2023
Purpose This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced pr... more Purpose This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced prudential performance of the banking industry and financial system stability in Nigeria. Design/methodology/approach This study uses regression analysis with regime shift to confirm results from tests of two means and variances model to examine the effectiveness of banking sector reforms in Nigeria. Findings Evidence from the regression model agrees with findings from the test of means model (not controlling for trend effects) that capital to assets ratio rose while non-performing loan ratio declined after the reforms, and that capital to earning assets ratio rose when trend effects were accounted for. Both the regression model and the tests of means model controlling for trend effects show that return on asset, return on equity and return on earning assets ratios declined after the reforms. Research limitations/implications This paper evaluated the effectiveness of banking sector reforms in Nigeria using models that avoid weaknesses that besieged many previous studies. It however used data covering 1983–2020 period, due to data availability. A larger scope of data may improve the results, and future research may re-examine this theme as more data become available. Furthermore, banking stability issues could be examined using specialised techniques such as the generalised autoregressive conditional heteroscedasticity model and related family. Practical implications These results suggest that the reforms led to improvement in the sector’s resilience (risks-absorbing capacity) and asset quality, and that profitability had not been the primary focus of the reforms. Social implications The authors recommend that regulatory and supervisory authorities in Nigeria continue to implement and improve on banking sector reforms for a more resilient and functional banking system. As a contribution to social research, this study shows that studies on policy evaluation should be located within appropriate theoretical framework: the theory of change. It shows that an appropriate use of attribution analysis and contribution analysis within this theoretical framework engenders robust analysis and results. Otherwise, the analytical findings would be erroneous and policy advice misguided. Originality/value The statistical significance of our findings establishes that the banking sector reforms in Nigeria have been effective in promoting financial system stability in Nigeria. By deploying both the test of means with and without trend effects (an attribution analysis) and the multivariate regression analysis with regulatory shift (a contribution analysis), and relying more on the later for its superiority, this study contributes to the body of knowledge in that, it not only determined the true effects of banking sector reforms in Nigeria for appropriate policy guidance but also demonstrated that, in research, an inappropriate methodology produces results that may diverge from the more accurate ones that were derived from the correct methodology.
The Ethiopian journal of business and economics, Nov 11, 2016
The increasing demand for better banking service delivery has prodded Nigerian Banks to deploy mo... more The increasing demand for better banking service delivery has prodded Nigerian Banks to deploy more information and communication technology (ICT) in their production. While several studies have evaluated the effects of the technological innovations on service delivery and financial performance in the Nigerian banking industry, limited attention has been paid to the role of ICT deployment on labour employment in the industry. This study therefore analysed a neoclassical production function to estimate the effects of ICT on labour employment in the industry. General Method of Moment was employed to analyse annual data on selected banks from 2003 to 2014. Results show that banks' production functions in Nigeria are not perfectly factor-substitutive but characterized by some elements of complementarity. ICT did not substitute for labour and thus not worsen unemployment. Banks should thus be encouraged to further embrace ICT in their production processes as this not only improves their service delivery and financial performance but also enhances employment generation in the country.
Purpose This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced pr... more Purpose This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced prudential performance of the banking industry and financial system stability in Nigeria. Design/methodology/approach This study uses regression analysis with regime shift to confirm results from tests of two means and variances model to examine the effectiveness of banking sector reforms in Nigeria. Findings Evidence from the regression model agrees with findings from the test of means model (not controlling for trend effects) that capital to assets ratio rose while non-performing loan ratio declined after the reforms, and that capital to earning assets ratio rose when trend effects were accounted for. Both the regression model and the tests of means model controlling for trend effects show that return on asset, return on equity and return on earning assets ratios declined after the reforms. Research limitations/implications This paper evaluated the effectiveness of banking sector reforms...
Deposit insurance coverage as an Explicit Deposit Insurance Scheme’s (EDIS) feature has been impl... more Deposit insurance coverage as an Explicit Deposit Insurance Scheme’s (EDIS) feature has been implemented in many jurisdictions to engender public confidence in the Banking System through offering various forms of depositors’ protection. Empirical analysis of the effects of this coverage on public confidence, especially in Nigeria, has however attracted limited attention; and there exists scanty documented evidence in the literature in this regard. The paper therefore estimated the effects of deposit insurance coverage, and its graduation in 2006 and 2010, on public confidence in the Nigerian Banking Sector. The analysis of nexus in the Q1, 1993 – Q2, 2018 period within the Two-Stage Least Squares (2SLS) and the Generalized Methods of Moments (GMM) models provides the following findings. Deposit insurance enhanced financial system stability (FSB) and increased public confidence in the Banking Sector. More deposits were attracted to the Banking System and currency outside the system d...
This paper reviews the Banking and Other Financial Institutions Act (BOFIA) 2020 in Nigeria in th... more This paper reviews the Banking and Other Financial Institutions Act (BOFIA) 2020 in Nigeria in the light of regulatory theories and extant empirical evidences, with a view to predicting its potential effects on financial system stability in Nigeria, domestic stakeholders and international investors. Our review shows that the new law attains a higher level of clarity in presentation of banking rules and regulations, tightens the incentive structures for compliance, widens regulatory breadth of financial sector coverage, penalises banks' office holders more severely for regulatory breaches, emphasises banks' compliance with prudential ratios, and improves banks' disclosure. Empirical evidence in the literature that suggests these improvements may enhance financial system stability is corroborated by analytical statistics of banking sector data over 1983-2020 period. Our findings show that financial and prudential performance of Nigerian banks significantly improved after regulatory reforms of 2004 and 2009, suggesting that their codification in BOFIA 2020 has a strong potential to enhance financial system stability in Nigeria to the benefits of all stakeholders. These merits may, however, be undermined by inherent pitfalls in the Act such as reduction in the roles of other financial safety-net participants, negative market signals of such reduction, weak harmonisation with other Acts governing relevant banking issues, and concentration of supervisory power in a single regulatory authority with its inclination for regulatory capture, among others.
This study provides explanation for weak linkage between private capital flows and economic growt... more This study provides explanation for weak linkage between private capital flows and economic growth of the sub-Saharan African region and offers policy recommendations for stronger linkage and growth optimization. Estimation of a simple growth equation shows, in support of stylized facts, that the flows do not significantly affect growth. Further analyses controlling for surge components of these flows and the effects of capital controls provides useful insights. Risk-sharing private capital (foreign direct investment and equity capital) proved beneficial in terms of growth contribution and improved credit supply while risk-apathetic capital (bond) harmed growth and weakened competitiveness. Surges to these flows imposed costs in terms of growth loss, reduced credit supply and poor capital formation. These costs detracted from the benefits and resulted in the weak linkage. Capital controls were more effective at containing surges to risksharing capital and when selectively targeted. ...
The roles of market interest rates in consumption smoothing have been fairly examined; their effe... more The roles of market interest rates in consumption smoothing have been fairly examined; their effects on consumption volatility however in various country groups have received limited attention. This study aims to estimate the effects of these rates on consumption volatility based on data from developed and developing country samples. The General Method of Moments (GMM) and the Two Stage Leas t Squares (2SLS) estimation techniques employed, due to the endogeneity property of the specified model, yield interesting results. Lending rates reduced consumption volatility in developed countries while saving rates did not worsen it. The rates had no effect in developing countries and mixed effects in the whole sample. The rates are relatively lower in developed countries and this partially explains why consumption volatility is lower in developed economies than in developing counterparts. As a result, the developing countries need to implement policies to reduce interest rates as a means of...
In theory, private capital flows (PCF) augment domestic capital for economic growth. In sub-Sahara... more In theory, private capital flows (PCF) augment domestic capital for economic growth. In sub-Saharan African (SSA)economies,foreign direct investment per capita (FDIC), portfolio investment per capita(PIC)and bank lending per capita (BLC) components of PCF grew inversely to gross domestic product per capita (GDPC). Previous studies have attributed this problem largely to recipient economies’ structural features, with little attention paid to PCF shocks (sharp fluctuations from the equilibrium path). Employing annual data on 14 SSA countries from 1990 to 2013, this study estimated a neoclassical growth model to evaluate the effects of PCF shocks on the SSA countries’ economic output and growth.The results showed that private capital flows positively affected economic output and growth, as hypothesized in theory. The effects of PCF shocks were negative, however, and are thus culpable for poor response of the region’s economic performance to inflows of private capital.
Purpose Most studies on electricity-economic growth nexus in the literature are preoccupied with ... more Purpose Most studies on electricity-economic growth nexus in the literature are preoccupied with causality, with little attention paid to the transmission mechanisms. The orientation of most of these studies is obviously predicated on their assumption that electricity enters the production function in a Hicks-neutral fashion. Based on the assumption that productivity of capital is affected by electricity supply, this study estimates a production function in which electricity enters the model in capital-augmenting style. The study aims to examine the transmission channels in the electricity-economic growth nexus. Design/methodology/approach Using monthly data on Nigeria from 1980 to 2013, the study uses the three-stage least square regression technique, which not only controls for possible endogeneity in the model but also allows for tracing the transmission linkages to estimate the relationship between electricity and economic growth in Nigeria. Findings This study establishes that ...
International Journal of Management and Economics, 2016
Most studies on corporate governance recognize endogeneity in the nexus between corporate governa... more Most studies on corporate governance recognize endogeneity in the nexus between corporate governance and financial performance. Little attention has, however, been paid to the direction of causality between the two phenomena, and hence the Vector Error Correction (VEC) model, which allows for endogenous determination of the direction of causality, has not been widely employed. This study fills that gap by estimating the nexus and the direction of causality using the VEC model to analyze panel data on selected listed firms in Nigeria. The results agree with the findings of most previous studies that corporate governance significantly affects financial performance. Board skills, board composition and management skills enhanced financial performance indicators – return on equity (ROE), return on asset (ROA) and net profit margin (NPM); in many occasions, significantly. Board size and audit committee size did not, and can actually undermine financial performance. More importantly, finan...
This study employs the general methods of moment (GMM) to examine the impact of oil price shocks ... more This study employs the general methods of moment (GMM) to examine the impact of oil price shocks on the Nigerian economy, using data from 1981 to 2012. After appropriate robustness checks, the study finds out that oil price shocks insignificantly retards economic growth while oil price itself significantly improves it. The significant positive effect of oil price on economic growth confirms the conventional wisdom that oil price increase is beneficial to oil-exporting country like Nigeria. Shocks however create uncertainty and undermine effective fiscal management of crude oil revenue; hence the negative effect of oil price shocks.
Oman Chapter of Arabian Journal of Business and Management Review, 2013
The study examines the long run and causal relationship between both stock market development and... more The study examines the long run and causal relationship between both stock market development and economic growth in Nigeria using annual data from 1980-2010. Vector Error Correction Model (VECM) and Cointegration technique of analysis were employed to analyze the data and draw policy inferences. The study found that stock market development as well as banking activity was cointegrated with economic growth in Nigeria. That is, there is a long run relationship among these variables in Nigeria. The result from VECM showed that economic growth granger causes both stock market development and banking activity in Nigeria. The study therefore, strongly recommends that policy makers should lay emphasis on the economic growth through the appropriate regulatory and macroeconomic policies to remove all constraints to the acceleration of the sustainability of economic growth and development in Nigeria.
This study focused on corporate governance and performance of selected Nigerian multinational fir... more This study focused on corporate governance and performance of selected Nigerian multinational firms from 2012 to 2016. Specifically, the study focused on the effect of board size, activism and committee activism on return on asset and firm growth rate. Secondary data collected from four multinational firms were analyzed via static panel estimation techniques. While board size and board activism exerted significant negative impact on return on asset, committee activism exerted insignificant impact. The results of the study further showed that board size and board activism exert insignificant negative impact on firm's growth rate, while committee activism insignificantly spurs firm's growth rate. Decisively, discoveries from this study reflect that corporate governance has significant negative impact on return on asset, but has insignificant influence on the growth rate of Nigerian multinational firms. Based on these findings, the authors recommended that corporate governance dynamics in firms world over should be reconsidered, such that it gives credence to more than just numbers of persons or meetings held, but the main reasons and deliberations in such meetings. It was also recommended that excessive increase in magnitude or frequency of meetings held by board of directors cum committee should be avoided.
Journal of Financial Regulation and Compliance, Jan 26, 2023
Purpose This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced pr... more Purpose This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced prudential performance of the banking industry and financial system stability in Nigeria. Design/methodology/approach This study uses regression analysis with regime shift to confirm results from tests of two means and variances model to examine the effectiveness of banking sector reforms in Nigeria. Findings Evidence from the regression model agrees with findings from the test of means model (not controlling for trend effects) that capital to assets ratio rose while non-performing loan ratio declined after the reforms, and that capital to earning assets ratio rose when trend effects were accounted for. Both the regression model and the tests of means model controlling for trend effects show that return on asset, return on equity and return on earning assets ratios declined after the reforms. Research limitations/implications This paper evaluated the effectiveness of banking sector reforms in Nigeria using models that avoid weaknesses that besieged many previous studies. It however used data covering 1983–2020 period, due to data availability. A larger scope of data may improve the results, and future research may re-examine this theme as more data become available. Furthermore, banking stability issues could be examined using specialised techniques such as the generalised autoregressive conditional heteroscedasticity model and related family. Practical implications These results suggest that the reforms led to improvement in the sector’s resilience (risks-absorbing capacity) and asset quality, and that profitability had not been the primary focus of the reforms. Social implications The authors recommend that regulatory and supervisory authorities in Nigeria continue to implement and improve on banking sector reforms for a more resilient and functional banking system. As a contribution to social research, this study shows that studies on policy evaluation should be located within appropriate theoretical framework: the theory of change. It shows that an appropriate use of attribution analysis and contribution analysis within this theoretical framework engenders robust analysis and results. Otherwise, the analytical findings would be erroneous and policy advice misguided. Originality/value The statistical significance of our findings establishes that the banking sector reforms in Nigeria have been effective in promoting financial system stability in Nigeria. By deploying both the test of means with and without trend effects (an attribution analysis) and the multivariate regression analysis with regulatory shift (a contribution analysis), and relying more on the later for its superiority, this study contributes to the body of knowledge in that, it not only determined the true effects of banking sector reforms in Nigeria for appropriate policy guidance but also demonstrated that, in research, an inappropriate methodology produces results that may diverge from the more accurate ones that were derived from the correct methodology.
The Ethiopian journal of business and economics, Nov 11, 2016
The increasing demand for better banking service delivery has prodded Nigerian Banks to deploy mo... more The increasing demand for better banking service delivery has prodded Nigerian Banks to deploy more information and communication technology (ICT) in their production. While several studies have evaluated the effects of the technological innovations on service delivery and financial performance in the Nigerian banking industry, limited attention has been paid to the role of ICT deployment on labour employment in the industry. This study therefore analysed a neoclassical production function to estimate the effects of ICT on labour employment in the industry. General Method of Moment was employed to analyse annual data on selected banks from 2003 to 2014. Results show that banks' production functions in Nigeria are not perfectly factor-substitutive but characterized by some elements of complementarity. ICT did not substitute for labour and thus not worsen unemployment. Banks should thus be encouraged to further embrace ICT in their production processes as this not only improves their service delivery and financial performance but also enhances employment generation in the country.
Purpose This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced pr... more Purpose This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced prudential performance of the banking industry and financial system stability in Nigeria. Design/methodology/approach This study uses regression analysis with regime shift to confirm results from tests of two means and variances model to examine the effectiveness of banking sector reforms in Nigeria. Findings Evidence from the regression model agrees with findings from the test of means model (not controlling for trend effects) that capital to assets ratio rose while non-performing loan ratio declined after the reforms, and that capital to earning assets ratio rose when trend effects were accounted for. Both the regression model and the tests of means model controlling for trend effects show that return on asset, return on equity and return on earning assets ratios declined after the reforms. Research limitations/implications This paper evaluated the effectiveness of banking sector reforms...
Deposit insurance coverage as an Explicit Deposit Insurance Scheme’s (EDIS) feature has been impl... more Deposit insurance coverage as an Explicit Deposit Insurance Scheme’s (EDIS) feature has been implemented in many jurisdictions to engender public confidence in the Banking System through offering various forms of depositors’ protection. Empirical analysis of the effects of this coverage on public confidence, especially in Nigeria, has however attracted limited attention; and there exists scanty documented evidence in the literature in this regard. The paper therefore estimated the effects of deposit insurance coverage, and its graduation in 2006 and 2010, on public confidence in the Nigerian Banking Sector. The analysis of nexus in the Q1, 1993 – Q2, 2018 period within the Two-Stage Least Squares (2SLS) and the Generalized Methods of Moments (GMM) models provides the following findings. Deposit insurance enhanced financial system stability (FSB) and increased public confidence in the Banking Sector. More deposits were attracted to the Banking System and currency outside the system d...
This paper reviews the Banking and Other Financial Institutions Act (BOFIA) 2020 in Nigeria in th... more This paper reviews the Banking and Other Financial Institutions Act (BOFIA) 2020 in Nigeria in the light of regulatory theories and extant empirical evidences, with a view to predicting its potential effects on financial system stability in Nigeria, domestic stakeholders and international investors. Our review shows that the new law attains a higher level of clarity in presentation of banking rules and regulations, tightens the incentive structures for compliance, widens regulatory breadth of financial sector coverage, penalises banks' office holders more severely for regulatory breaches, emphasises banks' compliance with prudential ratios, and improves banks' disclosure. Empirical evidence in the literature that suggests these improvements may enhance financial system stability is corroborated by analytical statistics of banking sector data over 1983-2020 period. Our findings show that financial and prudential performance of Nigerian banks significantly improved after regulatory reforms of 2004 and 2009, suggesting that their codification in BOFIA 2020 has a strong potential to enhance financial system stability in Nigeria to the benefits of all stakeholders. These merits may, however, be undermined by inherent pitfalls in the Act such as reduction in the roles of other financial safety-net participants, negative market signals of such reduction, weak harmonisation with other Acts governing relevant banking issues, and concentration of supervisory power in a single regulatory authority with its inclination for regulatory capture, among others.
This study provides explanation for weak linkage between private capital flows and economic growt... more This study provides explanation for weak linkage between private capital flows and economic growth of the sub-Saharan African region and offers policy recommendations for stronger linkage and growth optimization. Estimation of a simple growth equation shows, in support of stylized facts, that the flows do not significantly affect growth. Further analyses controlling for surge components of these flows and the effects of capital controls provides useful insights. Risk-sharing private capital (foreign direct investment and equity capital) proved beneficial in terms of growth contribution and improved credit supply while risk-apathetic capital (bond) harmed growth and weakened competitiveness. Surges to these flows imposed costs in terms of growth loss, reduced credit supply and poor capital formation. These costs detracted from the benefits and resulted in the weak linkage. Capital controls were more effective at containing surges to risksharing capital and when selectively targeted. ...
The roles of market interest rates in consumption smoothing have been fairly examined; their effe... more The roles of market interest rates in consumption smoothing have been fairly examined; their effects on consumption volatility however in various country groups have received limited attention. This study aims to estimate the effects of these rates on consumption volatility based on data from developed and developing country samples. The General Method of Moments (GMM) and the Two Stage Leas t Squares (2SLS) estimation techniques employed, due to the endogeneity property of the specified model, yield interesting results. Lending rates reduced consumption volatility in developed countries while saving rates did not worsen it. The rates had no effect in developing countries and mixed effects in the whole sample. The rates are relatively lower in developed countries and this partially explains why consumption volatility is lower in developed economies than in developing counterparts. As a result, the developing countries need to implement policies to reduce interest rates as a means of...
In theory, private capital flows (PCF) augment domestic capital for economic growth. In sub-Sahara... more In theory, private capital flows (PCF) augment domestic capital for economic growth. In sub-Saharan African (SSA)economies,foreign direct investment per capita (FDIC), portfolio investment per capita(PIC)and bank lending per capita (BLC) components of PCF grew inversely to gross domestic product per capita (GDPC). Previous studies have attributed this problem largely to recipient economies’ structural features, with little attention paid to PCF shocks (sharp fluctuations from the equilibrium path). Employing annual data on 14 SSA countries from 1990 to 2013, this study estimated a neoclassical growth model to evaluate the effects of PCF shocks on the SSA countries’ economic output and growth.The results showed that private capital flows positively affected economic output and growth, as hypothesized in theory. The effects of PCF shocks were negative, however, and are thus culpable for poor response of the region’s economic performance to inflows of private capital.
Purpose Most studies on electricity-economic growth nexus in the literature are preoccupied with ... more Purpose Most studies on electricity-economic growth nexus in the literature are preoccupied with causality, with little attention paid to the transmission mechanisms. The orientation of most of these studies is obviously predicated on their assumption that electricity enters the production function in a Hicks-neutral fashion. Based on the assumption that productivity of capital is affected by electricity supply, this study estimates a production function in which electricity enters the model in capital-augmenting style. The study aims to examine the transmission channels in the electricity-economic growth nexus. Design/methodology/approach Using monthly data on Nigeria from 1980 to 2013, the study uses the three-stage least square regression technique, which not only controls for possible endogeneity in the model but also allows for tracing the transmission linkages to estimate the relationship between electricity and economic growth in Nigeria. Findings This study establishes that ...
International Journal of Management and Economics, 2016
Most studies on corporate governance recognize endogeneity in the nexus between corporate governa... more Most studies on corporate governance recognize endogeneity in the nexus between corporate governance and financial performance. Little attention has, however, been paid to the direction of causality between the two phenomena, and hence the Vector Error Correction (VEC) model, which allows for endogenous determination of the direction of causality, has not been widely employed. This study fills that gap by estimating the nexus and the direction of causality using the VEC model to analyze panel data on selected listed firms in Nigeria. The results agree with the findings of most previous studies that corporate governance significantly affects financial performance. Board skills, board composition and management skills enhanced financial performance indicators – return on equity (ROE), return on asset (ROA) and net profit margin (NPM); in many occasions, significantly. Board size and audit committee size did not, and can actually undermine financial performance. More importantly, finan...
This study employs the general methods of moment (GMM) to examine the impact of oil price shocks ... more This study employs the general methods of moment (GMM) to examine the impact of oil price shocks on the Nigerian economy, using data from 1981 to 2012. After appropriate robustness checks, the study finds out that oil price shocks insignificantly retards economic growth while oil price itself significantly improves it. The significant positive effect of oil price on economic growth confirms the conventional wisdom that oil price increase is beneficial to oil-exporting country like Nigeria. Shocks however create uncertainty and undermine effective fiscal management of crude oil revenue; hence the negative effect of oil price shocks.
Oman Chapter of Arabian Journal of Business and Management Review, 2013
The study examines the long run and causal relationship between both stock market development and... more The study examines the long run and causal relationship between both stock market development and economic growth in Nigeria using annual data from 1980-2010. Vector Error Correction Model (VECM) and Cointegration technique of analysis were employed to analyze the data and draw policy inferences. The study found that stock market development as well as banking activity was cointegrated with economic growth in Nigeria. That is, there is a long run relationship among these variables in Nigeria. The result from VECM showed that economic growth granger causes both stock market development and banking activity in Nigeria. The study therefore, strongly recommends that policy makers should lay emphasis on the economic growth through the appropriate regulatory and macroeconomic policies to remove all constraints to the acceleration of the sustainability of economic growth and development in Nigeria.
This study focused on corporate governance and performance of selected Nigerian multinational fir... more This study focused on corporate governance and performance of selected Nigerian multinational firms from 2012 to 2016. Specifically, the study focused on the effect of board size, activism and committee activism on return on asset and firm growth rate. Secondary data collected from four multinational firms were analyzed via static panel estimation techniques. While board size and board activism exerted significant negative impact on return on asset, committee activism exerted insignificant impact. The results of the study further showed that board size and board activism exert insignificant negative impact on firm's growth rate, while committee activism insignificantly spurs firm's growth rate. Decisively, discoveries from this study reflect that corporate governance has significant negative impact on return on asset, but has insignificant influence on the growth rate of Nigerian multinational firms. Based on these findings, the authors recommended that corporate governance dynamics in firms world over should be reconsidered, such that it gives credence to more than just numbers of persons or meetings held, but the main reasons and deliberations in such meetings. It was also recommended that excessive increase in magnitude or frequency of meetings held by board of directors cum committee should be avoided.
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Papers by Ibrahim Alley