An Analytical and Theoretical Investigation of The Determinants of Deposit Money Bank’s Investment in Treasury Bills in Nigeria (1970-2009)

Abstract

This study is an analytical and theoretical  investigation of the determinants of deposit money bank’s investment in treasury bills in Nigeria (1970-2009). One hypothesis was formulated to guide and direct the study. The hypothesis formulated was stated thus, there is no significant linear relationship between changes in each of the explanatory variables namely; treasury bill rate, total loan and advances, total liabilities, average lending rate, average liquidity ratio and deposit money banks investments in treasury bills. Data for the study was collected from the  CBN statistical bulletin and annual report of various years up to 2009. Data were analyzed, tested using the ordinary least square estimation procedures. Findings resulting from the test showed that the five variables used were able to explain 97 per cent of the total systemic variations in bank’s investments in treasury bills.  It was recommended that; the regulatory authorities should make treasury bill rate attractive to deposit money banks in other to ensure that they subscribe a significant percentage of the treasury bill issued by the central bank. Top management of banks should develop adequate and effective strategies aimed at mobilizing adequate deposit for their operations.

Key words: Determinants of deposit money banks’ investments, Treasury bills.