Money Market Instruments and Economic Growth of Nigeria

Abstract

This study investigated the relationship between the money market instruments and economic growth of Nigeria using time series analysis from 1981-2019. The relevant variables for which data were sourced include: Real gross domestic product, Financial deepening indicator [ratio of money supply (M2) to gross domestic product – (M2/GDP)(%)], value of treasury bills outstanding, value of Certificate of deposit outstanding, value of commercial paper outstanding, and value of banker acceptance outstanding. The data extracted from the CBN statistical bulletin, vol. 30, 2019. The Augmented Dickey Fuller (ADF), Johansen cointegration test and Error Correction Mechanism (ECM) were adopted. The research findings found that, there is significant relationship between money market instruments and economic growth in Nigeria. Furthermore, there is insignificant relationship between money market instruments and the development of the Nigerian financial system. The study recommends amongst others, the need for Government to create appropriate macroeconomic policies, legal framework and consolidate and improve on reforms with a holistic view to developing and deepening the market so as to promote productive activities, investments, and ultimately economic growth.
 
 JEL: E41; E50; E51
 
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Money Market Instruments and Economic Growth in Nigeria

“…The analysis of findings showed that while bankers' acceptance had a considerable negative effect on performance of banks, treasury bills, commercial papers, and Federal Government Bonds (FGB) had a positive effect. Obi (2021) used time series analysis to examine the relationship between Nigeria's money market instruments and economic growth from 1981 to 2019. Real gross domestic product (GDP), Treasury Bills, Certificates of Deposit, Commercial Paper, and Banker Acceptance were pertinent variables for which data were sourced.…”

Money Market Instruments and Price Stability in Nigeria: 1981 – 2021

“…Treasury Certificate: This is a medium term government security which matures after a period of one to two years and are intended to bridge the gap between treasury bill and long term government securities. According to Nzotta (2014), treasury certificate plays a major role in the development of the money market. Development Stock: These are fairly long term debt instruments issued by the Central Bank of Nigeria on behalf of the Federal Government.…”

“…These papers are subscribed by banks and the funds generated are used by the issuing company to finance working capital requirements (Appah & Tebepah, 2017). Bankers Acceptance: This is a written order drawn by an individual or firm upon a bank ordering the bank to pay a sum of money on a specified date in the future (Nzotta, 2014). Federal Government Bonds: This is an investment mechanism available by the Sovereign that will assist to attain the investment wishes of low-high income citizens in the economy by improving our savings culture whilst also performing as inefficient and efficient debt management structure for monetary management.…”

“…According to Pavtar (2016), money market is a critical element of any given financial markets because it contributes to the economic growth and development process of nations. Nzotta (2014) state that the money market is a market which consists of structures designed for obtaining and mobilizing short term funds or exchanging financial assets representing short term claims. Okezie (2012) argued that money market is a market that deals with short term instruments that are readily convertible into cash and whose maturity range between a few days and two years.…”

Money Market Instruments and Economic Growth in Nigeria

“…For instance, on one hand, empirical studies by distinguished scholars including Pavtar (2016); Eze and Mansi (2017); Etale and Ayunku (2017); Uruakpa (2019); Gbenga, Olorunleke, Tajudeen and Hamzat (2021); as well as Tsintop and Bala (2023) on money market and economic growth, revealed that the money market instruments have positive and significant (meaningful) influence on economic growth. On the other hand, empirical studies by Obi (2021); Ishola, Oni, Kolapo (2021) revealed that though money market instruments have positively influenced economic growth in Nigeria but their influence is not significant (meaningful).…”