MONEY MARKET AND PRIVATE INVESTMENT ACTIVITIES: ANY EMPIRICAL EVIDENCES OF CAUSATION AND CAUSALITY FROM THE NIGERIAN BANKING SECTOR?

Epor, Okaja Simon¹, Steve Ibenta², Yua Henry³ and Ityavyar Doosuur Vivian⁴

^1,2 Department of Banking and Finance, Nnamdi Azikiwe University, Awka

³ Department of Banking and Finance, Mewar International University-Nigeria

⁴ PhD Scholar, Department of Accounting University of Abuja-Nigeria

Abstract

The study was set out to evaluate the model of money market financing activities of banks and its influence on private investment activities in Nigeria. The study was specifically undertaken to assess the efficiency and effectiveness of the money market. The independent variables were: aggregate funds to banks from money market funding facilities (MMF) and aggregate credits by banks through money market facilities (MMC). Control variables adopted for the study were: aggregate broad money supply (M3) and aggregate credit to the private sector from the banking sector (CPS). Data for this series were collected from 1990 to 2021 from the CBN statistical bulletin as well as the World Bank data base. Autoregressive Distributed Lag technique was employed to estimate the models of interest rate. Result from the ARDL model estimation revealed that: aggregate money market funds to banks significantly supported private investments in Nigeria; while money market credits by banks were deleterious to domestic private investments in Nigeria. The study therefore recommends more depth for the Nigerian money market to create room for more financial inclusion, and probably, a second-tier market be introduced for lower income cadre. As a matter of policy target, private investments as well as money market ratio to the GDP be pursued at 25% level; and finally, there is need to address the preponderance of government instruments and paucity of private sector instruments, to make the Nigerian money market more responsive to the financing needs of the private sector.

Keywords: Money Market, Money Market Savings, Money Market Credits, Private Investments, ARDL