Developments in Money Market Operations and Economic Viability in Nigeria: An Empirical Analysis

Abstract

Money market provides instruments for effective liquidity management and acts as the core source of raising short-term funds for lubricating economic activities in any nation. This study seeks to empirically explore developments in Money market operations and Economic viability in Nigeria. Economic viability is proxied by Gross Domestic Product (GDP) and represents the explained variable. Core Money market instruments commonly used in Nigeria such as Treasury bills (TB), Treasury Certificate (TC), Certificate of Deposit (CD), Commercial Papers (CP) and Banker Acceptances (BA) served as the explanatory variables. The data used for empirical estimation covered the period 1981 to 2011 and were sourced from CBN statistical Bulletin, 2011. Analysis of data was carried out using Multiple Regression technique parameters. Research findings were robust. The variation in the growth trends of GDP and the explanatory variables in a graphic representation appear to cast doubts on whether Money market operations made significant contributions to GDP in the period under review. However, the results from Pearson correlation coefficient matrix substantially attest to strong linear relationship between the explained and explanatory variables. Besides, the summary statistics of the model as indicated by the Coefficient of determination (R²) and ANOVA F-Statistics showed that the estimated model passed the test of overall significance at all significant levels, implying that a long run relationship exists between Money market operations and Economic growth in Nigeria. Though, the study data relates solely to the Nigerian economy, it has strong relevance and implications for developing and emerging economies and monetary agencies globally. Therefore, we recommend that monetary authorities should initiate policies to boost Money market operations and be proactive in their surveillance role in order to check practices that are capable of sabotaging market soundness.

Key Words: Developments, Money market, Money market instruments, Economic viability, Gross Domestic Products (GDP), Nigeria