Digital Financial Technologies and Monetary Policy Effectiveness: An Empirical Analysis of Nigeria’s Financial Ecosystem

Toyin Joseph Olufolahan, Olawale Daniel Akinyele and Raimi Adekunle Anisere-Hameed
Additional contact information
Toyin Joseph Olufolahan: Federal University of Agriculture and Development Studies, Iragbiji, Nigeria
Olawale Daniel Akinyele: Department of Economics, Redeemers University, Ede, Nigeria *Corresponding author’s email: Akinyeleolawale9@gmail.com
Raimi Adekunle Anisere-Hameed: Department of Economics, Redeemers University, Ede, Nigeria

Ilorin Journal of Economic Policy, 2026, vol. 13, issue 2, 103-116

Abstract: Nigeria's monetary authority faces a growing challenge as digital financial technologies (DFTs) evolve faster than the instruments used to implement monetary policy. This study examines whether DFTs, including electronic payments, banking digitalisation, and the eNaira, enhance or weaken monetary policy transmission in Nigeria. Using quarterly data from 2009Q1 to 2024Q4, a composite Digital Financial Technology Index (DFTI) is constructed via Principal Component Analysis and incorporated into a DOLS model that covers the interest-rate, credit, and exchange-rate channels, alongside forecast error variance decomposition and Toda–Yamamoto causality tests. The results show that digitalisation increases inflationary pressures, destabilises the velocity of money, and weakens the pass-through of the monetary policy rate to lending rates. However, the credit channel remains largely effective, while digital finance continues to promote economic growth. Causality results indicate that the policy rate still influences inflation and credit, although digital finance increasingly conditions the transmission mechanism. The findings suggest that Nigeria has reached a threshold where further digital deepening reduces the effectiveness of conventional interest-rate policy. The study recommends integrating digital-finance indicators and real-time digital transaction data into the Central Bank of Nigeria's monetary policy framework to strengthen policy effectiveness

Keywords: Digital Financial Technology; e-Naira, Monetary Policy; Cointegrating regression (search for similar items in EconPapers)
JEL-codes: L86 O30 O33 O35 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ijep.org/issues/volume13issue132026/v2 ... olahan%20(2026)).pdf
https://www.ijep.org/issues/volume13issue132026/v2 ... olahan%20(2026)).pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:ilojep:023872

DOI: 10.4314/ijep.v13

Access Statistics for this article

Ilorin Journal of Economic Policy is currently edited by Godwin Oluseye Olasehinde-Williams

More articles in Ilorin Journal of Economic Policy from Department of Economics, University of Ilorin Contact information at EDIRC.
Bibliographic data for series maintained by Daniel Akanbi ().