Determinants of Excess Liquidity in the Nigerian Banking System

Augustine, Ujunwa; Okoyeuzu, Chinwe; Ukpere, Wilfred I.

doi:10.6000/1929-7092.2018.07.48

Cited by 1 publication

(3 citation statements)

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“…However, its positive impact on DMBs balances contrasts with economic resonance as an increase in SLF rate should discourage DMBs' recourse to the facility, hence a drop in bank liquidity. The result is closely related to the finding by Augustine et al [10] where the positive 4 Given that the restriction is on the parameters and the ARDL bounds test reports both the R-squared and loglikelihood values for each of the models, an LR test is suitable to test the restrictions on substitutability or complementarity of the variables. The LR test is expressed as LR(r)=-2LLR-LLU~r2.…”

Section: Short-run Effectssupporting

confidence: 71%

“…Augustine et al [10] analyse various drivers of excess liquidity in the Nigerian banking system. Their choice variables range from the DMBs aggregate closing balances and treasury bill rate to lending facility rate and interbank rate, The paper essentially emphasises idle liquidity over banks' operational needs and monetary policy efficacy.…”

Section: Empirical Literature Reviewmentioning

confidence: 99%

“…With this exposition, Osakwe, Agbo and Okonkwo [9], Augustine, Chinwe & Ukpere, [10], Chuku [11] and Olekah [8] have amongst others, examined the CBN's monetary policy instruments in liquidity management. While this is a step forward, these studies do not show the exact link with liquidity management in the banking system.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Effectiveness of Monetary Policy Instruments on Bank Liquidity Management

Balakeffi¹,

Tawose²,

Tajudeen³

et al. 2022

SAJSSE

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Recognising the importance of monetary and price stability for sustainable growth, many countries’ Central Banks often set certain liquidity targets to be achieved using various monetary policy instruments. This study fills the gap in the literature by employing the ARDL Bounds test to examine the relative effectiveness of a combination of quantity- and price-based policy instruments used by the Central Bank of Nigeria to regulate the level of bank liquidity. Also, the likelihood ratio test is used to determine whether monetary policy instruments work better as a complement (or substitute) concerning liquidity management. Using quarterly data covering 2008/Q1-2020/Q2, we found that, price-based instruments mostly impact liquidity levels in the short- and long-run. The quantity-based instrument shows a significant impact at second lag. However, the impacts of some policy instruments were inconsistent which is partly due to their low usage as short-run measures. We found all the six monetary instruments considered in this study to be complementary for liquidity management. By implication, the combination of monetary instruments for liquidity management is in order. While MPR remains crucial in determining liquidity, a continuous review of its operationality to identify and reduce possible distortions will be beneficial. Also, there is a need for CBN to reassess the disbursement of interventions and their implications on liquidity.

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Section: Short-run Effectssupporting

confidence: 71%

Section: Empirical Literature Reviewmentioning

confidence: 99%