THE GROWTH IMPACT OF MONEY MARKET IN NIGERIA: AN IMPERATIVE OF FINANCIAL INNOVATION

Abstract

The paper examines the impact of the money market on economic growth in Nigeria, using times series data sourced from the CBN statistical bulletin from 1981 to 2016. The study also employs the ordinary least squares (OLS) technique anchored on market segmentation and pure expectation theories and the endogenous growth model to examine the impact of the money market on economic growth in Nigeria. The long-run model result of the study revealed that treasury bills (TBs), federal government bonds (FGB), and the human capital investment (HC) have a positive and significant impact on economic growth in Nigeria while monetary policy rate (MPR) and commercial paper (CP) have a positive but insignificant impact on economic growth in Nigeria. The result of the study further showed that bankers’ acceptance (BA) has a negative and insignificant impact on economic growth in Nigeria. The study concludes that money market instruments have a positive impact on economic growth in Nigeria except for bankers ‘acceptance. The study recommends that the monetary authority should make money market tools (especially the BA) more growth-promoting in Nigeria by introducing fresh, innovative, and attractive short-term financial assets that will meet the various needs of money market participants.