MONEY MARKET AND ECONOMIC GROWTH IN NIGERIA

Abstract

Abstract: Money market is a component of the financial system, which is for trading in short-term financial instruments. The major objective of this study is to analyze the effect of selected money market instruments on economic growth in Nigeria from 1986-2019. The independent variables employed in the study include Commercial Bank deposits (CBD), Commercial Bank Credit to the Private Sector (CPS), Commercial Papers (CP), Treasury Bills (TB), Banker’s Acceptance (BA) and Certificate of Deposit (CD). Growth Rate of Gross Domestic Product (RGDP) was used to proxy economic growth. Data were obtained from Central Bank of Nigeria Statistical Bulletin 2019, and analyzed using the Autoregressive Distributed Lag (ARDL) and Vector Error Correction Model (VECM) Regression techniques. The findings revealed that money market instruments such as Bankers Acceptance had an insignificant positive effect on economic growth. Commercial Bank Deposit, Commercial Papers, Credit to the Private Sector, Treasury bills and Certificate of Deposit had insignificant negative effects on economic growth in Nigeria. It was therefore, recommended that policies that will reduce the cost of credit, harmonize the formal and informal sectors of the money market and enable the activities of the money market to stimulate economic growth be designed and implemented in Nigeria.