DETERMINATION OF MONEY SUPPLY IN NIGERIA
ABSTRACT
Money supply is one of the important macroeconomic variables. The control of money supply is an essential tool in conducting monetary policy within the monetary targeting framework. The success of monetary policy critically depends on the controllability the monetary authority has over money supply.
In view of this, this research work aimed at identifying the variables that determine money supply in Nigeria, specifies the correct relationships between these variables and money supply as well as to provide statistical evidence vis-a-vis the relationship in Nigeria, and also examines the most current important issues and questions in Nigerian money supply determination. Thus, the thesis lays emphasis in monetary policy as well as the viability of money supply and its determination in Nigerian economy. The period covered is 1983 to 2008.
In the course of determining the relationship, the study applied the econometric technique- Ordinary least squares Estimates (O.L.S.E), Error correction model(E.C.M) to time series data. More so, correlation matrix, percentage proportion and co-integration technique using, the unit root and granger causality test is used to verify the stationarity of the time series in order to avoid analyzing inconsistent and spurious relationship in the model, thus, ascertain whether past value helps to explain current value.
From the regression result, it was found that all the variables put forward i e money supply in the last period, domestic credit to public sector, domestic credit to private sector, net foreign assets and net of other items were significant in explaining money supply determination in Nigeria. By implication, Using Standard Granger Causality test, this study demonstrates that money supply in Nigeria for the period 1980-2003 is not exogenously determined.
CHAPTER ONE
1.0. Introduction
Money supply mechanism has been receiving increasing attention than any other subject matter in the field of monetary economics in recent years. Because of the importance of money supply via monetary policy in achieving macro-economic objectives of nations (developed and developing), persistent concern has always been given among monetary economists including Ajayi (1972), Mckinnon (1973), Shaw (1973), Oyejide (1974), Fry Mathieson (1980), Ojo (1993), Ghatak (1995), Odedokun (1996), Levine (1997), Tomori (1984) ,Asogu (1998) , Ogun and Adenikinju (2004), and Owoye and Onafowora (2007) to the process of money supply and its determination.
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