Money Supply In Nigeria Research Articles

Domestic Private Investment and Selected Macroeconomic Indicators in Nigeria:An Econometric Analysis

Domestic private investment (DPI) plays significant role in economic growth of any economy. It helps in mobilizing domestic resources for socio-economic advancement. Domestic Investment and its determining factors remains one recalling issues in the field of economics and international finance. This is based on the fact that aggregate investment plays a dominant role in stimulating economic growth and development of every nation. However, most of the developing and underdeveloped economies have witnessed low domestic investment and consequently slow economic growth. Therefore, this study investigates the relationship, trends, and impact of domestic private investment and selected macroeconomic indicators in Nigeria, a developing economy. The study analyzed data gotten from the CBN Statistical Bulletin for the duration of 1991-2020. The statistical package used for the study is Econometric Views (E-Views 9.0). Multiple regression techniques via OLS, Augmented Dickey Fuller (ADF) test and Granger causality procedure was applied to determine causalities while Johansen Co-integration test was administered to verify sustainability of the long-run relationships. The result revealed that there exist short and long-run relationships between domestic private investment and key macroeconomic variables- Inflation, Lending rates, gross domestic savings, real gross domestic product, money supply in Nigeria. Vector error correction model was also adopted to determine the speed of adjustment between the independent variables and the dependent variables. The OLS result revealed that there exist a positive and significant relationship among GDSA, BMOS, RGDP and PDIV, negative and significant relationship among PLER, INFR, and PDIV. Therefore, the study recommends among others that Nigerian government must be resolute in their resolve to drive private domestic investment in the country by implementing appropriate monetary and fiscal policies that address inflation, interest rate, domestic savings and money supply. This will no doubt fast track inclusive growth.

Responses of Inflation to Fiscal Deficit and Money Supply in Nigeria

Responses of Inflation to Fiscal Deficit and Money Supply in Nigeria

Impact of Monetary Policy on Economic Growth in Nigeria: 1985-2022

The study examined the impact of monetary policy on economic growth in Nigeria, using annual data spanning the period 1985 to 2022. One of the major objectives of monetary policy in Nigeria is economic growth but despite the various monetary efforts that have been adopted by the Central Bank of Nigeria over the years, inflation remains a major threat to Nigeria's economic growth. Despite the increased focus on monetary policy adoption in Nigeria, the country's economic growth remains an issue. High unemployment, low investment, high inflation, and an unstable foreign exchange rate are examples of such issues. These alleged issues are said to have contributed to Nigeria's rapid drop in economic growth. The objective of this paper is to examine the relationship between economic growth, exchange rate, inflation rate, interest rate, and money supply in Nigeria. In this regard, the study employed the Autoregressive-Distributed Lag (ARDL) approach and established a long-run relationship between economic growth and interest rate, inflation, exchange rate, and money supply. Specifically, the findings suggested that in the long run only interest rate has significant effects on economic growth while exchange rate, money supply, and interest rate have a positive relationship with the dependent variable, it was only the inflation rate that has a negative relationship with economic growth in Nigeria. Given the important role of interest rates in promoting economic growth, the study recommends that a significant decrease in interest rates will lead to an increase in the growth of the economy as the reduced interest rate will serve as bait for investors in the Nigerian economy.

Application of Bayesian Vector Autoregressive Models in the Analysis of Quasi Money and Money Supply: A Case Study of Nigeria

Aims: The aim of this study is to model the relationship between Nigerian quasi money and money supply using the Bayesian Vector Autoregressive (BVAR) model.
 Study design: The study collected and analyzed monthly data from the Central Bank of Nigeria (CBN) money and credit statistics over an 8-year period (November 2015 to December 2022). The analysis utilized both Vector Autoregressive (VAR) Model and BVAR model to examine the dynamics between these variables and their implications for monetary policy.
 Methodology: The study employed the Bayesian Vector Autoregressive (BVAR) model to analyze the relationship between Nigerian quasi money and money supply. Monthly data from the Central Bank of Nigeria (CBN) over an 8-year period was collected and subjected to both Vector Autoregressive (VAR) Model and BVAR model for analysis.
 Results: The findings indicated that there is no long-run relationship between Nigerian narrow money and quasi money, but quasi money does granger cause changes in narrow money, and vice versa. This suggests a multi-directional effect between the two variables. The BVAR model consistently outperformed the VAR model in terms of higher Adjusted-R² values, indicating its stronger ability to explain the variance in the data. The BVAR model provided a more robust and accurate representation of the relationship between these variables. The model exhibited stability and the absence of heteroscedasticity in the residuals, indicating a stable relationship between the variables. The impulse response function showed an immediate impact of changes in narrow money on the overall money supply in Nigeria.
 Conclusion: This study contributes to existing knowledge by empirically examining the relationship between Nigerian narrow money and quasi money and also concluded that there existed no co-integrating relationship between narrow money and quasi money, which has important implications for effective monetary policy strategies, particularly in Nigeria.

Impact of Budget Deficit Financing on Money Supply in Nigeria

This study empirically investigated the impact of budget deficit financing on money supply in Nigeria. The study is modeled using a framework of Keynesian theory of budget deficit financing and Richadian Equivalent hypothesis. Due to the homogeneity of macroeconomic variables, it adopted a vector error correction mechanism (VECM) which shows the existence of long run relationship between money supply and indicators of financing budget deficit. The general findings revealed that external source of financing budget deficit; internal source of financing budget deficit as well as debt servicing has a significant effect on money supply for the period under review in the Nigerian context. Base on these findings, the study recommended that external and internal source of financing budget deficit should be encouraged for effective and increased economic stability in Nigeria and not for political reasons. It should be properly channeled to productive sector of the economy that enhances economic stability.

Trade Balance, Exchange Rate and Money Supply in Nigeria: Growth Implications and Lesson for African Countries

The significance of trade in the development of nations made this study examine the impact of trade balance, exchange rate, and money supply on economic growth with reference to Nigeria's economy and serve as a lesson for other African countries. The study relies on the Mundell-Fleming BOP model for its framework with the use of secondary time-series data extracted from the statistical bulletin of the Central Bank of Nigeria from 1981 to 2020. The ARDL cointegration of the least square was adopted. The result showed a long-term relationship among trade balance, exchange rate, broad money supply, interest rate, inflation rate, and economic growth in Nigeria. Our study thus concludes that the oil trade balance is the fundamental driver of Nigeria's economic growth, and appropriately, we suggested that to ensure economic growth in Nigeria and other African countries, the government should strategize on policies to develop trade in the non-oil sector; also the monetary authorities should design frameworks towards making money supply growth enhancer, and stabilization of the exchange rate for domestic countries to gain more from trade by intensifying the flux of credit to the real and exporting sector towards setting the economies on the track of expansion.

Determinants of Private Sector Growth in Nigeria, 1981 - 2020

This study examines and analyses the determinants of private sector growth in Nigeria. The dependent variable is Private Sector Growth (PSG) and the independent variables are Real Gross Domestic Product (RGDP), Interest Rate (INTR), Per Capita Income (PCI), Inflation Rate (INFR), Exchange Rate (EXR), Broad Money Supply (BMS). The data for the study were sourced from CBN Statistical Bulletin, 2019 / 2020 edition from 1981 to 2020. The study employed Cointegration and Error Correction Mechanism as the main analytical tool. It also applied the unit root test and results showed that the data were integrated at order one while the long-run relationship among the variables was confirmed using the Johansen (1988) cointegration test. Estimates of the Error Correction Model result showed that Interest Rate (INTR), Exchange Rate (EXR) have a negative significant relationship with the determinants of private sector growth in Nigeria, Broad Money Supply (BMS) has a negative significant relationship with the determinants of private sector growth in Nigeria. In conclusion from the above results, it was observed that the determinants of the private sector growth in Nigeria contributed to the improvement and enhancement of Interest Rate, Exchange Rate and Broad money Supply in Nigeria. It was recommended that interest rate, exchange rate and broad money supply have a significant positive and negative relationship between interest rate, exchange rate and broad money supply with the determinants of private sector growth in Nigeria base on this result: it is recommended that continued attraction of real sector development from private investors would boost economic growth in Nigeria. And also to develop human capital for Nigeria would be to put in place policies and infrastructures that could encourage private investment inflows.

INVESTIGATING THE EFFECTIVENESS OF STERILIZATION POLICY IN CONTROLLING MONEY SUPPLY AND CAPITAL INFLOWS IN NIGERIA

Over the last decade, Nigeria has witnessed rising capital inflows that have kept the monetary authorities on their toes. This study, therefore, investigated the effectiveness of sterilization policy in controlling money supply and capital inflows in Nigeria. The need for this investigation arose from observed dearth of study in this area in Nigeria as well as the surge in capital inflows within the study period with its likely macroeconomic implications. The study would answer the question: (1) to what extent does sterilization effort of the Central Bank of Nigeria effective in controlling capital inflows in Nigeria, (2) to what extent is sterilization policy able to regulate money supply in Nigeria. By utilizing monthly data spanning a period of 2010-2018 under the framework of Two Stage Least Squares (2SLS), findings show that the sterilization policy of the CBN is effective in regulating money supply and depressing capital inflows both in period of normal capital inflows and in period of intensive capital inflows. We therefore recommend that in periods of sudden and volatile capital inflows, sterilization measure should be given a priority in order to stave off the negative consequences of such unexpected inflows. We also recommend fiscal prudency on the part of the fiscal authorities, especially within the period of high and volatile capital inflows just as the observance of a synergy between fiscal and monetary policies is not ruled out.

Determinants of Money Supply in Nigeria

Studies on money supply determinants focus on the Classicists or Monetarists, Keynesians and post-Keynesians variables like income and money multiplier. This research extends the literature on money supply determinants to include the influence of financial liberalization on money supply with a reference to Nigeria between 1980 and 2019, using the Autoregressive Distributed Lag (ARDL) approach. Data used for the study were collected from the 2019 CBN Annual Statistical Bulletin. The study found that financial liberalization is an important factor in determining money supply in Nigeria, in addition to currency ratio, required reserve ratio and high-powered money. As a result, the extent of the liberalization of the financial sector matters in decisions on the regulation of money supply in the economy.

IMPACT OF MONETARY POLICY TARGETS ON CAPITAL MARKET DEVELOPMENT IN NIGERIA

This study empirically examines the impact of monetary policy targetson capital market development in Nigeria from 1986-2018. Time series data and econometric tools were used to test for the stationarity and causality effect. The Auto-Regressive Distributed Lag Model (ARDL) and Error Correction Model (ECM) techniques were used to examine the short-run and long-run impact and relationship between Monetary Policy and Capital Market Development in Nigeria. The study revealed that both in the long run and short run Exchange Rate (EXCHR), Inflation Rate (INFR), and Interest Rate in Nigeria (INTR)were negatively related to Capital Market Development (CAMKTD) in Nigeria and they were statistically insignificant in explaining changes in Capital Market Development (CAMKTD) in Nigeria. On the other hand, inthe long run, Money Supply was positively related to Capital Market Development (CAMKTD) in Nigeria and was statistically significant at a 5% level significant while Money Supply (M2) was positively related to Capital Market Development (CAMKTD) in Nigeria both in the long run and short-run and was statistically significant at 5% level of significance. Therefore, the study recommends that government should improve the efficiency and effectiveness of the money supply in Nigeria since it was statistically significant in determining the improvement of Capital Market Development (CAMKTD) in Nigeria.

Effect of Fiscal Deficit on Selected Macroeconomic Variables in Nigeria: A Time Series Analysis, 1986-2018

This study investigated the effect of fiscal deficit on selected macroeconomic variables in Nigeria. Specifically the study examined the effects of fiscal deficit on Nigeria’s gross domestic product, determine the impact of fiscal deficit on the level of Money Supply in Nigeria, and ascertain the relationship between fiscal deficit and Inflation Rate in Nigeria. To achieve these objectives, the study employed various econometric techniques such as unit root test, Johansen co-integration, ordinary least square and granger causality test in which variations in the independent variables were regressed on the dependent variable using time series data from 1986-2018. Secondary data casing the time frame were collected from Central Bank of Nigeria statistical bulletin. The results of the analysis indicates that (i) Fiscal Deficit (FD) has positive and no significant effect on Gross Domestic Product (GDP) (ii)Fiscal Deficit (FD) has negative and no significant impact on Money Supply (MS) (iii) Fiscal Deficit (FD) has negative and no significant relationship with Inflation Rate (INFR).The study recommended among others that government should set its priority rights, be more committed to budget implementation and to pay more attention to capital expenditure geared towards growth. Systemic corruption which is the main reason why fiscal deficit has not positively impacted on macroeconomic indicators should be dissuaded in Nigeria. The study further recommended that key government institutions should mount programs that are directed towards restoring the value system, norms and mind-set of Nigerians which corruption has destabilized and made weak to be strong again, otherwise, Nigeria will systematically drift into extinction.

Determinant of Private Sector Credit and Its Implication on Economic Growth in Nigeria: 2000-2017

The study examined the determinant of private sector credit and its implication on economic growth in Nigeria. The fluctuation in the supply of money and credit is the basic causal factor at work in cyclical process; when money supply falls, prices decrease, profit decrease, production activities become sluggish and production falls and when money supply expands, price rise, profit increase and the total output increases and finally growth takes place. The main objective of this study is to examine the relationship between Private Sector Credit and Gross Domestic Product. Data were obtained from Central Bank of Nigeria statistical bulletin. Simple regression analysis was used to achieve the stated objective. It was revealed in the determinant of credit supply equation 1 that there was significant relationship between Total credits to private sector and money supply in Nigeria. It was also discovered in the Private Sector Credit and Economic Growth Equation 2 that there was significant relationship between private sector credit and economic growth in Nigeria. The study therefore recommends that there should be persistence increase of money supply to Nigerian economy in order to increase the flow of credit to the real sector of the Nigerian economy, financial institutions should distribute more credit to the real sector for productive purposes in order to increase Gross domestic product.

REVENUE DISTRIBUTION FROM FEDERATION ACCOUNT AND MONEY SUPPLY: EVIDENCE FROM NIGERIA

AbstractMoney supply in every economy is very vital for economic growth and stability. However, the role of revenue distribution in ensuring the success of monetary policies revolving around money supply in Nigeria cannot be over-estimated. The study examines the impact of revenue distribution to the three tiers of government on money supply (MSS) in Nigeria. Time series data used for the study estimation span from 1981-2016 and were obtained from CBN statistical bulletin, 2016 edition and World Bank website. The specific purpose of the study is to establish the extent to which revenue allocation to federal, state, local governments and derivation allowance to the mineral producing states affect money circulating in the Nigerian economy. Ordinary least square method (OLS) was employed with the aid of SPSS version 20 to test the impact of revenue distribution on money supply. The findings reveal that revenue allocation to federal government has a significant positive impact on money supply. Allocation to local government councils has insignificant positive impact on money supply. On the contrary, allocation to states and the derivation allowance to Niger Delta States exert significant negative influence on MSS in Nigeria. The study concludes that, revenue allocation to states and derivation allowance contribute to inflation in the country and recommended stringent monetary policies that will determine the percentage of allocated revenue usage by all tiers of government in a particular period to avoid too much money in circulation. Keywords: Revenue distribution, allocation, money supply, economic stability, derivation.JEL CODE: E51, E64.

Independent Generated Revenue of Three Tiers of Government and Money Supply in Nigeria

<p><strong><em>Aim/Purpose:</em></strong><em> The purpose of this study is to provide empirical evidence on the impact of independent generated revenue of the three tiers of government on money supply in Nigeria.</em></p><p><strong><em>Design/methodology/approach:</em></strong><em> The study employs ex post facto research design and makes use of annual time series data spanning from 1981 to 2017. The data have been sourced from CBN Statistical Bulletin 2017 edition and CBN Annual Reports while Ordinary Least Squares method is used to carry out the analysis with the aid of Statistical Package for Social Sciences (SPSS) version 20.</em></p><p><strong><em>Findings:</em></strong><em> The results of the study indicate that Federal Government Independent Revenue (FGIR) and State government Independent Revenue (SGIR) influence money supply positively and significantly. On the contrary, the Local Government Independent Revenue has an insignificant negative impact on money supply.</em></p><p><strong><em>Research implications/Limitations:</em></strong><em> The implication of this finding is that if independent generated revenue under the jurisdiction of Local Government Councils in Nigeria is not properly regulated by the Monetary Authority in the country through a well-structured monetary policy measures, it will adversely affect the money supply. </em></p><p><strong><em>Originality/value/contribution:</em></strong><em> this study has been able to establish the influence of independent revenue of each tier of government in Nigeria on money supply. Most importantly, the study finds evidence that independent generated revenue of local government councils in Nigeria does not have positive influence on money supply in the country. Therefore, the study suggests that monetary policies in the country should incorporate local government optimal management of revenue to avoid unfavorable economic situations such as inflation which is prompted by too much money circulating in an economy.</em></p>

Monetary Policy and Money Supply in Nigeria: A Comparative Analysis: 1993-2018

The study researched on a comparative analysis of the impact of monetary policy on money stock in Nigeria. Monthly data were sourced from the CBN online database between 1993M1 and 2018M10. Monetary policy rate (MR), cash reserve ratio (CR) and liquidity ratio (LR) represented the main monetary policy instruments that were made the explanatory variables while broad money supply (M2) stood as dependent variable. ADF and PP tests were carried out to make the data stationary and then VAR and ECM were employed for analysis. Standardised coefficient through the ARDL was also used for proper comparison. Finding of the study revealed that, in the short run, all the variables had the correct negative signs but only the CR was significant, while in the long run, all variables were correctly signed and significant except for CR. Also, monetary policy had a high speed of adjusting the money stock back to equilibrium. The result also unveiled that, LR had the greatest impact in regulating money stock, followed by CR and the MR. However, MR had the highest ability to forecast money stock, followed by LR and then CR, and the abilities were felt even up to the eight month. The study, therefore recommends that the monetary authority should give most attention to LR in regulating money stock in Nigeria and mostly consider MR in forecasting the stock of money. JEL Codes: E52, E58 DOI : 10.7176/PPAR/9-3-12 Publication date :March 31 st 2019

The Performance of the Kernel Regression Model for Assessing the Impact of Money Supply on Industrial Growth in Nigeria

This study examined the performance of the kernel model over the linear regression model for a real-life application in Nigeria. The linear regression and kernel regression model was used to assess the impact of the volume of money supply in Nigeria on industrial growth in Nigeria. The source of data for this study was the secondary source of data collection. Findings showed that there exist a weak positive coefficient of determination measure between volume of money supply and industrial growth which implies that the volume of money weakly explains the total amount of variation in industrial growth using the linear regression model while the kernel model found a strong positive coefficient of determination value which implies that the kernel model was adequate and far better than the linear model for estimating industrial growth in Nigeria. Also, it was found that volume of the money supply does not impact significantly on industrial growth in Nigeria using the linear model while it was found that volume of money impacts significantly on industrial growth using the kernel model. Further findings showed that the residual standard error value for the smoothed model is relatively more efficient than that of the linear model which was attributed to the performance of the kernel regression model.

Fiscal Financing and Money Supply in Nigeria: An Empirical Analysis

Fiscal Financing and Money Supply in Nigeria: An Empirical Analysis

Macroeconomic Variables and Money Supply: Evidence from Nigeria

This paper reviews the effect and implication of selected Macroeconomic variables on Money supply (M2), using derived secondary data gotten from the Central Bank statistical Bulleting (2013). Coupled with the application of econometric technique such as; O.L.S., causality test and Co-integration of time series data to estimate the long and short run relationship and causality of employed variables. The results revealed that all variables were stationary at various lags and there exists a long run relationships between variables employed and it was discovered that apart from inflation having an inverse significance with Money supply (M2) and Exchange Rate (EXR), all other variables such as Gross Domestic Product (GDP) were found to have a positive impact on Money Supply. It was therefore recommended that Nigeria Banks should be committed to the mission of price stability as well as improving the regulatory and supervisory frameworks to secure a strong financial sector for efficient intermediation in other to avoid the inflationary impacts government should control the excessive expansion in broad money supply in Nigeria. Keywords: money supply, inflation, GDP, Exchange Rate

Pure Portfolio Approach to Money Supply Determination in Nigeria: A Generalized Method of Moments Approach

This study analyses broad money supply in Nigeria using a pure portfolio approach in order to establish an econometric framework which forecasts the Nigerian money multiplier with great precision. Methodologically, the Generalized Method of Moments (GMM) model was modeled to analysis the nature of the framework, where broad money supply is presumed to depend upon changes in various indicators of supply of money and a list of instrumental variables (IV) which were estimated over the period 1970-2010. Integral to this process is to determine if there exist a stable relationship between various measures of money supply, the monetary base and the instrumental variables, given a switch by the Central Bank from a direct to an indirect policy regime. In the results, it was found that there exist partial stable relations between these measures of money supply: the broad money and base money despite regime shifts over the sample period. However, a stable money multiplier was not found. This approach produced a scientific framework that could be used to predict the money multiplier derived from the broad money and could be used to forecast on an annual basis with reasonable accuracy at least in the medium term and projections in the monetary programme.

Monetary Policies and Efficacy of Monetary Supply in Nigeria

In this study, we establish the relationship between monetary policies control and the efficacy of money supply in Nigeria. We examine the adjustment process in money supply and multiplier from disturbance to equilibrium. The methodology used in estimating the model of this study is the three stage least square. We solve for the long run elasticity co- efficiency and the speed of adjustment from disturbance to equilibrium. It was therefore concluded given the limit set by the specified equation in this study, that there exist high significant relationship between money supply and high-powered money and that the short-run and long run impact of high powered money and money supply are positive. It follows therefore that if monetary authorities want to control money supply, it is necessary to forecast the value of the money multiplier. Once the money multiplier is predicted the amount of high-powered money required to achieve a desire level of money supply can be determined.