Assessment of the Determinants of Demand for Money in Nigeria: 1981- 2020

Abstract

This study examined economic reassessment of the demand for money and behaviour of its determinant: Empirical evidence from Nigeria using time series annual data from 1981-2020 which constitutes 40 years. The Augmented Dickey-Fuller unit root test was employed to establish the stationarity of the variables, bound tests analyses indicated that there is a long-run equilibrium
relationship between the understudied variables and short-run equation of ARDL model was estimated to determine the speed of adjustment of the broad money supply to long-run equilibrium at three lags selected. The findings were that there was evidence of a long-run equilibrium relationship between independent variables (LRGDP, INT, INF, EXR, TRO) on the money supply (LBMS) in Nigeria. It was found that exchange rate has significant negative effects the money demand in the long-term but positively in short-term and also an increase in RGDP will raise money demand. From the findings, the recommendation made included; that Nigeria can use interest rate and control economic as a tool to adjust money demand and conduct of monetary policy in Nigeria should continue to focus on monetary aggregates, especially their growth rates.