Money Market Instruments and Growth of the Nigerian Economy: An Empirical Analysis

Abstract

This paper investigated the effect of selected money market instruments on the growth of the Nigerian economy. Using data obtained from Central Bank of Nigeria Statistical Bulletin 2017, the study employed the Autoregressive Distributive Lag (ARDL) Bound Testing approach to co-integration. Result shows no form of convergence among the variables in the long-run. It also revealed that money market variables are positively related with economic growth rate both in the short and long-run, except for Certificate of Deposit (COD) and Commercial Paper (CPR) that has an inverse relationship with economic growth in the long-run. Broad Money Supply (M2G) does not seem to have a significant relationship with GDPR both in the short and long-run, while Treasury Certificate (TRC) has a significant positive impact on GDPR in the short-run but an insignificant impact on GDPR in the long-run. Thus, caution should be taken by the Central Bank of Nigeria in the use of Treasury Certificate as a means of managing liquidity in the short-run, as its prolonged use would amount to no significant effect in the economy. Also, Certificate of Deposit and Commercial Paper should be used on short term basis, if otherwise; their impact on the economy would be negative.