Abstract
Money market instruments play a crucial role in the growth and development of the Nigerian economy. Still, it is not yet vibrant and constrained by the absence of sub-markets and availability of adequate credit instruments required for the smooth operations of the market. The study examine the impact of money market instruments (Treasury bill, Treasury certificates, Certificate of Deposits, Banker’s Acceptances, Development Stock and Commercial Papers) on Economic growth based on secondary data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin and National Bureau of Statistics (NBS) publications for 30 years. The study employed statistical techniques such as ADF, Unit Root Test, OLS, multiple-regression and Granger Causality Test to analysis data collected for the study covering the period 1990-2020. The study observed that Bank acceptance and Commercial paper granger cause Gross Domestic Product (GDP). Treasury bill, Treasury certificate and commercial papers have a positive relationship with GDP, but its effect is insignificant in the long run. But banker’s acceptance and certificate of deposits has a positive and significant effect on GDP in the long run. In contrast, development stock has no significant effect on GDP in the short and the long run with no granger causal relationship with GDP. The study therefore recommends that Nigerian money market should be reformed in line with the current globalization trend and internationalization of the money market to allow a flow of foreign investment into the economy and also increase the number of tradable instruments in the market.
Highlights
The level of growth and development recorded in an economy cannot be separated from the level of growth and development recorded in its financial sector, as this sector helps in mobilization of funds from Surplus Spending Units (SSU) and channel same to Deficit Spending Units (DSU) based on sound pricing and efficient allocation principles
The study examine the impact of money market instruments (Treasury bill, Treasury certificates, Certificate of Deposits, Banker’s Acceptances, Development Stock and Commercial Papers) on Economic growth based on secondary data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin and National Bureau of Statistics (NBS) publications for 30 years
The Findings show that Banking system Credit to the Domestic Economy (CDMB) and Money Supply (M2) have significant effects on the Gross Domestic Product (GDP) (Economic Growth) while Value of Deals (VOD) and Market Capitalization (MCAP) which are the Capital Market variables were not statistically significant
Summary
The level of growth and development recorded in an economy cannot be separated from the level of growth and development recorded in its financial sector, as this sector helps in mobilization of funds from Surplus Spending Units (SSU) and channel same to Deficit Spending Units (DSU) based on sound pricing and efficient allocation principles Besides this function, the financial sector helps in providing the mechanism for firms and other economic agents to appraise the value of firms’ assets thereby allowing investors to make informed decision as to the allocation of their funds as lenders on the one hand, and the best alternative form of liability instruments to issue, as borrowers, on the other hand (Lawal, 2014). In developing economies like Nigeria money markets are still underdeveloped as such the absence of a well-developed money market in these countries poses a challenge in pooling funds large enough to fund private
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