Nigerian Journal of Banking and Financial Issues (NJBFI)

THE INFLUENCE OF MONEY SUPPLY ON PRIVATE SECTOR FUNDING IN NIGERIA

Abstract

This article was carried out to examine the influence of money supply on private sector funding in Nigeria. The article specifically examined the influence of money supply, monetary policy rate, and inflation rate on credit to private sector. The variable of interest which is private sector funding was measured with total credit to private sector while independent variable of money supply was proxied with three variables namely; broad money supply (M2), inflation rate, and monetary policy rate. The article employed secondary annual time series data which spanned from 1991 to 2024. The data used were extracted from Central Bank of Nigeria Statistical Bulletin 2023 edition. Preliminary tests were conducted using Augmented Dickey-Fuller to determine the level of integration of the variables of interest. Consequent upon the findings of the above tests, the article employed Auto-Regressive Distributed Lag (ARDL) as the method to estimate the specified model. The article used the Breusch Pagan test to conduct residual post-diagnostic test. Findings from the article indicated that broad money supply at p-value of 0.0271 has significant but negative influence on private sector funding, On the other hand, monetary policy rate at p-value of 0.0367 has a positive and significant influence on private sector funding. While, inflation rate also has a positive but insignificant influence on the private sector funding within the period under review. The article therefore, concluded that money supply has a significant but negative influence on private sector funding in Nigeria. The article therefore, recommended that monetary authority specifically the Central Bank of Nigeria should put up measures to ensure an increase in the volume of money in circulation and that money supply contribute positively to availability of adequate funding to the private sector of Nigerian economy.