Money and economic growth in Nigeria.
2015-11-19T09:11:57Z (GMT) by
The emergence of Nigeria from the monetary anarchy of the turn of the century set forth historical processes for the establishment of modern monetary institutions. This was achieved at the cost of limited growth of currency in circulation because of sterling exchange standard without any fiduciary element in it and the domination of the commercial banking industry by the expatriates. The subsequent establishment of the Central bank of Nigeria and the control of the commercial banks still left the monetary instruments and institutions in an under-developed stage. A feature of that could be the complementarity of money with the physical capital, where a typical saver-investor had to do so only in the form of money with very little access to credit market, which itself was inadequate. The choice-theoretic basis of such a relation has been investigated and then tested for the period, 1960-1987. The results confirm the complementarity between narrow money and physical capital, whereas broad money turned out to be a substitute because interest rate could be earned on some deposit parts of it. The test also suggested an upward shift of the macro production function during the oil boom, and backward shift during the depression. The supply of money in the post-civil-war period has been analysed in the demand/supply format of money and of monetary base. The tests confirm the lack of interest-elasticity of demand/supply of money, though there is now a hint for such response. The endogeneity of money supply has been suggested in one set of results. The stability of the system is shown to depend on the partial adjustment of money only, and the results confirm that condition. Such findings have been used for a closed and open macroeconomic model for policy discussions, which ends with an enquiry into the stability of the open model.