Impact of Money Market Instruments on Economic Growth in Nigeria

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.