MONEY MARKET INSTRUMENTS AND ECONOMIC GROWTH IN NIGERIA

George-Anokwuru, Chioma Chidinma

Abstract


This paper examined the effect of money market instruments on economic growth in Nigeria from 1980 to 2020. To achieve the above objective, secondary data on real gross domestic product, treasury bills, commercial papers, bankers’ acceptances and monetary policy rate were sourced from the statistical bulletin of Nigeria’s apex bank. The Error Correction Mechanism (ECM) was used as the main analytical tool. The result revealed that all the instruments of money market – treasury bills, commercial papers and bankers’ acceptances have positive effect on economic growth in Nigeria during the period of study. This means that money market instruments – treasury bills, commercial papers and bankers acceptances enhanced economic growth in Nigeria during the period of study. However, only bankers’ acceptances significantly (meaningfully) influenced economic growth in Nigeria during the period of study. What this suggests is that though treasury bills and commercial papers have contributed to economic growth in Nigeria from 1980 to 2020, but their contribution is very low to trigger a meaningful increase in economic growth. At the same time, Monetary Policy Rate has negative and insignificant relationship with economic growth in Nigeria during the period considered in this study. The study concluded that money market instruments - treasury bills, commercial papers and bankers’ acceptances have impacted on economic growth in Nigeria. Therefore, recommended that government should put in place policies that will increase the operations of money market in Nigeria in order to make short-term securities and loans available for investment. Deposit money banks and other operators in the money market should be encouraged to possess sufficient approved securities for trading in the money market. Government should ensure easy and effective communication between the operators in the money market. At the same time, there should be a downward review of the cost of raising funds in the Nigerian money market so as to enhance competitiveness and improve the attractiveness of the market as one of the major sources of raising funds for investment which in turn will increase economic growth in Nigeria.

JEL: E44; G14

 

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Keywords


money market instruments, economic growth, ECM and Nigeria

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DOI: http://dx.doi.org/10.46827/ejefr.v8i1.1631

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