Risk to Economic Growth in Nigeria: Focus on Money Market Instruments

Uduakobong Inyang, Ezema Clifford Anene, Aniekan Etim Bassey and Emediong Iniobong Aaron
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Uduakobong Inyang: Department of Insurance, University of Uyo, Akwa Ibom State, Nigeria.
Ezema Clifford Anene: Department of Insurance & Risk Management, Enugu State University of Science and Technology, Enugu, Nigeria.
Aniekan Etim Bassey: Akwa Ibom State House of Assembly Uyo Akwa Ibom State Nigeria.
Emediong Iniobong Aaron: Department of Insurance, University of Uyo, Akwa Ibom State, Nigeria.

International Journal of Research and Innovation in Social Science, 2023, vol. 7, issue 2, 244-253

Abstract: Money market instruments play crucial role in financial intermediation with a knock-on on economic growth. However, evidence on the evaluation of risk to economic growth of specific money market instruments in an emerging economic such as Nigeria is limited. Interestingly, availability of such evidence is significant to policy and practice in the money market to enhance effectiveness and economic growth. This paper therefore evaluates risk to economic growth by examining the relationship between money market instruments and economic growth in Nigeria for the period 1986 to 2021. Annual time series data for the real gross domestic product, GDP, a measure of economic growth, as well as selected money market instruments of treasury bills, certificate of deposit and commercial papers was extracted from 2021 CBN bulletin for the study. Autoregressive distributed lag, ARDL, model was adopted for data analysis in the study. The result indicated a statistically significant negative relationship between treasury bills and economic growth in the short run and an insignificant positive relationship in the long run. However, certificate of deposit demonstrated a positive significant relationship with economic growth in the short run and a negative insignificant relationship with economic growth in the long run. Also, commercial papers showed a negative significant relationship with economic growth in the short run and a positive insignificant long run relationship. These findings indicate that the money market does not support economic growth in Nigeria with a conclusion that the market shows signs of inefficiency. A cautious use of these money market instruments to manage liquidity on both short and long run is therefore recommended. Further study can focus on examining the impact of treasury bills bought by Deposit Money Banks and Non-Bank public on Real Gross Domestic Product of Nigeria to provide specific evidence that can guide policy and practice on a specific instrument.

Date: 2023
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