THE EFFECTS OF MONEY MARKET ON NIGERIA’S ECONOMIC GROWTH

Abstract

The establishment of the financial market in Nigeria arose from the need to stem the influx of
excess liquidity into the investment channel in London's financial market. Further
considerations that necessitated the development of the financial institution in Nigeria
includes; the improvement of efficient and effective monetary administration, promotion of
deposit money banks (DMBs), Portfolio administration and also facilitating short-term
capital mobilization. This research, therefore, explores the effects of the money market on
Nigeria's economic growth between 1982-2022. The motivation for this research was
necessitated by the need to appraise the operations of money market mechanisms in
stimulating Nigeria's economic growth. Thus, the ARDL model was espoused to study the
influence of money market tools on Nigeria's economic growth. The variables employed
were; Real Gross domestic product growth rate (RGDPR) Treasury bills, Treasury
Certificate, Development Stock, Certificate of Deposits, Commercial Papers, Bankers
Acceptance, Federal Government Bonds (MMKTI), Financial Deepening (FD), and interest
rate (ITR). The result of the ARDL analysis in the short run shows that money market
instruments have an affirmative and significant influence on Nigeria's Economic growth. At
the same time, the long–run, ADRL result shows that money market instruments have not
made a substantial impact on Nigeria's economic growth because most of its instruments
traded in the market are not yet fully developed coupled with unstable monetary policies and
High interest rates. The remarkable progress witnessed in the 20th century is not in doubt
symptomatic of future projections which may transform into bigger defies in the years to
come. However, the Nigerian money market has in no doubt noted some substantial growth
since its commencement; hence, a lot is still required to be done especially, in the areas of
public awareness, improvement in operational efficiency, enhancement in the depth and
breadth of the market and also building regulatory capacity. The study, however,
recommended among others; increasing public awareness, Policy stability and reduction in
the cost of loanable funds.