IMPACT OF TREASURY BILLS RETURNS ON FINANCIAL INTERMEDIATION IN NIGERIA
IMPACT OF TREASURY BILLS RETURNS ON FINANCIAL INTERMEDIATION IN NIGERIA
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Date
2015-04
Authors
SHEYIN, Shinkut Hilary
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Abstract
This study attempts to examine the impact of Deposit money banks’ investment on treasury Bills and the impact thereof on the amount of credit extended by these banks to the private sector in Nigeria. The study estimated a model which suggests that supply of loans and advances by DMBs was a function of Total deposit, Treasury Bills, FGN Bonds, interbank rates, and the Yield spread between Loans and Treasury Bills. A Vector Error Correction (VEC) technique was used to estimate the model using quarterly data for the period of 2003-2013. The study finds that: (i) a negative relationship exists between loans to the private sector and treasury bills holding of DMBs (ii) the spread between credit to private sector and Treasury Bills returns determined their demand in the short run, and (iii) FGN Bonds had a more significant negative effect on financial intermediation than Treasury Bills. The study concludes that demand for government’s deficit financing instruments reduced financial intermediation in Nigeria but the effect runs more through FGN Bonds than through Treasury Bills. From these findings, the study recommends that policies which could stabilize the economy and stimulate high investment returns in the longer term could encourage banks to concentrate more on intermediation activities, and policies that would re-align the returns government debt instruments and private sector debt instrument could further deepen the market and encourage competition between government and private sector debt instruments.
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A THESIS SUBMITTED TO THE SCHOOL OF POSTGRADUATE STUDIES, AHMADU BELLO UNIVERSITY, ZARIA, IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF MASTERS OF SCIENCE DEGREE IN ECONOMICS DEPARTMENT OF ECONOMICS FACULTY OF SOCIAL SCIENCES, AHMADU BELLO UNIVERSITY, ZARIA, NIGERIA
Keywords
IMPACT,, TREASURY BILLS RETURNS,, FINANCIAL INTERMEDIATION,, NIGERIA