Amount: $39.69 |

Format: Ms Word |

1-5 chapters |

INSTANT PROJECT MATERIAL DOWNLOAD


Bank Name: FCMB Bank
Account Name: SEDTECH HUBLET INTL
Account Type: Savings
Account number: 7749601025

Bank Name: Access Bank
Account Name: SEDTECH HUBLET INTL
Account Type: Current
Account number: 0107807602


THE IMPACT OF MONEY MARKET INSTRUMENT ON MONEY SUPPLY IN NIGERIA A CRITICAL ANALYSIS 2006-2020


$39.69 – DOWNLOAD FULL PROJECT

Abstract

The study examines the impact of money market instrument on money supply in Nigeria with emphasis on 2006-2020. The data for the study were sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin. This was analyzed with the SPSS 21 statistical package in line with Ordinary Least Square (OLS) estimations. Basically, the Ordinary Least Squares form of regression was adopted as the principal estimation method. It was found out that interest rate positively and significantly impact on the investment in both public Money Market instrument (Treasury bill) and corporate money market instrument (Commercial Papers) in Nigeria. On the basis of the above, it is expected by way of policy implication, that the government should dutifully manage the interest rate regimes to allow for a purposeful driving of the money market to the advantage of the economy and market players alike.

 

 

 

 

 

CHAPTER ONE

INTRODUCTION

  • Background of the study

The quest to balance the financial disequilibrium that exist within an economy remains the basis for the existence of financial markets. Financial markets are institution or arrangements which facilitates the exchange of financial assets such as deposit and loans, stock and government securities (Martin, 2014). The market is classified into money markets and capital markets. This paper focuses on the instruments of money market which are essentially short term in nature. These short-term instruments are made possible through the use of credit instruments of high quality such as treasury bills, treasury certificates, Bankers acceptance, commercial papers, eligible development funds, certificates of deposits etc. Kanu (2011) noted that money markets in Nigeria like money markets in other countries of the world are made up of various markets in financial instruments. Dealings in these financial instruments constitute the money market. The different markets in a money market are identified by type of financial instrument each deals on. The instruments have maturities ranging from one day to one year and are extremely liquid and less risky. As part of fund and liquidity management programmes or strategies, these instruments enable banks to meet deposit and loan demands (Ebhodaghe, 2015). Examples of such strategies include holding of short-term financial assets which are highly marketable, maintaining avenues for short-term accommodation from the Central Bank or other banks and bidding for a greater volume of deposits. A portfolio of short-term money market securities held by a bank can be easily sold or rediscounted for cash. This approach and inter-bank borrowing constitute the major sources of liquidity for Nigerian banks. When Central Bank action and regulations restrict the activities and operations of profit making financial institutions such as banks, they search for alternative ways of making profit (Atanda and Ajayi, 2012). The effects of monetary policy instruments are not noticed directly, rather they become more obvious through their effects on money market instruments. Like all businesses, banks make profit by earning more money than what they pay in expense. The major portion of a bank’s profit comes from the fees that are charged for its services and the interest that it earns on its assets. The major assets of a bank are its loans and advances and short-term financial instruments that it holds, while its major liabilities are its deposits and the money that it borrows, either from other banks or by selling commercial papers in the money market. Loans and other credit facilities are bank’s assets and are used to provide most of a bank’s income. Money market instruments serve as a buffer which banks rely on in time of cash crunch. Banks’ involvement in the manipulation of short-term market debt-instruments as an intermediary, yields returns which adds to profit maximization. The money market instruments due to their liquidity, less risky nature and short-term maturity are added in the determination of bank liquidity ratio. It is expected that this path would provide a sustainable path for Nigerian banks towards greater performance, but in spite of all these, most banks are reluctant to invest in money market instruments. At times, they only invest the statutory amount required by Central Bank of Nigeria and prefer to trade with other large chunk of mobilized Funds say in direct loans and advances where high interest rates are negotiated and there are prospects for higher returns. Mohammad (2014) noted that money market instruments are awfully traded in high denominations and offer significantly lower return than most other securities. Banks see money market instruments as highly regulated with their rates fixed by regulatory agencies or not definite and low returns. The instruments with high returns for banks witness low patronage. Banks do not have the powers to negotiate their interest rates unlike the rate of loans that are determined before advances or disbursements are made. Also, for some of these securities to be converted into cash in times of urgent need of funds, they are discounted, thus causing the banks to lose part of their invested principal. Ndugbu (2013) noted that most money market instruments such as Treasury Bills do not carry an explicit rate of interest but are sold on a discount basis, with the difference between the buying price and maturity value functioning as an implicit yield to the lender. If a bank pays N9,500 today for a treasury bill that will be worth N10,000 one year from now, than at the end of the year you will have earned N500 or 5.263% on the investment. The ability of the stock market to accelerate economic activities in an emerging economy remains necessary and important. The stock market no doubt plays a major role in financial intermediation in both advanced and evolving countries. Financial intermediation is a function that links the suppliers of funds to those users of funds. Thus, one key objective of the Nigerian stock market is to regulate and control the flow of funds. It is a platform for buying and selling securities. The Nigerian stock market provides the quotation platform for companies. The private sector has welcomed this avenue and being crusaders for creating a multiplier effect on the economy. Omodero (2019) rightly stated that no economy can survive in its total absence of the private sector. The securities market appears to be an organized and safe environment to plough back credit by the private sector. But the private sector was queried in Omodero (2019) as being of a complex environment. The Securities and Exchange Commission over the years has monitored the market performance in response to money supply management. Against this backdrop, the Nigerian Stock Exchange adoptedmarket capitalization as a potent index of performance measurement for depth based on total value shares registered in the market. The Nigerian stock market activities are however expected to cover the space of monetary policies by the Central Bank of Nigeria by complementing its fiscal policies to drive and stabilise the Nigerian economy. Fundamentally, the public would like to experience much money in circulation to have means of financial asset investment. Meanwhile, an excess supply of money is a liability and also risky for the monetary authorities. Hence, it becomes expedient to achieve the desired objective by the Central Bank of Nigeria. The Central Bank of Nigeria collaborates with the Securities and Exchange Commission through rules and regulations to stabilise the Nigerian stock market meant for economic growth and development. In all the lofty outlooks from the market in the area of driving growth and development, it is earnest to note that certain conservational factors affect the operational efficiency of the Nigerian stock market. A number of these factors are linked to the macroeconomic setting.

  • STATEMENT OF THE PROBLEM

The Economic system consists of monetary institutions and markets that regulate the flow of funds through the macro-economy of the country (Nwude, 2004). The financial sector of every economy is to co-ordinate the activities of both the surplus and deficit economic units, and the process is referred to as “the financial intermediation role” of financial institutions (Edoumiekumo & Akarara, 2016). The financial market constitutes primarily of Money and Capital markets. The capital market provides long-term funds with a maturity period of over one year or 365 days through bonds and equity. Thus it serves as the mechanism by which the savings of surplus economic units could also be wont to finance medium and long-term investments. The money market as a sub-segment of the financial markets is a market for shortterm investments and in the promotion of liquidity. Nwosu and Hamman (2008) opine that the money markets are a significant part of the financial infrastructure and architecture of industrial countries among the most important financial markets in the world. According to Mohammed (2014), the existence of money market engenders trading in short-term instruments to meet the little needs of large users of funds such as the government, banks and large corporate organizations. The money market is effectuated through money market instruments principally for short-term investments. Egbide (2009), some promising investments with a high rate of return has clothed to be failures due to inadequate capital while many factories have either been temporarily or completely shut down because they could not meet their financial obligations as when due because of liquidity problems.

  • OBJECTIVE OF THE STUDY

The study has one main objective which is further broken down into general and specific objective, the general objective is to examine the impact of money market instrument on money supply in Nigeria. The specific objectives are;

  1. To examine the impact of money market instrument on money supply in Nigeria
  2. To examine if there is any significant relationship between money market instrument on money supply in Nigeria
  • To examine the effect of money market instrument on economic growth in Nigeria
  1. To explore the role of central bank of Nigeria (CBN) in the regulation of money market instrument
    • RESEARCH QUESTIONS

The following research questions were formulated by the researcher to aid the completion of the study;

  1. Is there any significant relationship between money market instruments on money supply in Nigeria?
  2. Does money market instruments have any impact on money supply in Nigeria?
  • Is there any effect of money market instrument on economic growth in Nigeria
  1. Does central bank of Nigeria (CBN) play any role in the regulation of money market instrument?
    • RESEARCH HYPOTHESES

The following research hypotheses were formulated by the researcher to aid the completion of the study;

H0: there is no significant relationship between money market instruments and money supply in Nigeria

H1: there is a significant relationship between money market instruments and money supply in Nigeria

H0: Money market instruments does not have any impact on money supply in Nigeria

H2: Money market instruments does have an impact on money supply in Nigeria

  • SIGNIFICANCE OF THE STUDY

It is believed that at the conclusion of the study the findings will be of great importance to the management of Nigeria deposit money banks who are saddle with the responsibility of money creation in the society. The study will also be of great importance to researchers who intends to embark on a study in a similar topic as the study will serve as a pathfinder to further studies.

The study will also be of great importance to students, teachers, academia’s and the general public as the study will add to the pool of existing literature on the subject matter and also contribute to knowledge on the subject matter.

1.7 SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers the impact of money market instrument on money supply in Nigeria with emphasis on 2006-2020. In the course of the study, there are some factors that limited the scope of the study;

  1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
  2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
  3. c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

1.8 OPERATIONAL DEFINITION OF TERMS

Money market

The money market refers to trading in very short-term debt investments. At the wholesale level, it involves large-volume trades between institutions and traders.

Money market instrument

Money market instruments consist of Treasury bills, federal agency notes, certificates of deposit (CD), commercial papers, bankers' acceptances, repurchase agreements (repos), among others.

Money supply

Money supply is the total value of money available in an economy at a point in time. There are several ways to define “money”, but standard measures usually include currency in circulation and demand deposits.

1.9 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

$39.69 – DOWNLOAD FULL PROJECT
0Shares

Author: SPROJECT NG