The Demand for Money in Nigeria

Abstract

This study examined the demand for money in Nigeria. The study used annual time series spanning 26 years on both narrow and broad money, Income interest rate, exchange rate and the stock market. The study employed the use of multiple regression analysis, the unit-root test for stationarity and CUSSUM stability test. The study found out that money demand function is stable in Nigeria for the sample period and that income is the most significant determinant of the demand for money. It was also gathered that stock market variables can improve the performance of money demand function in Nigeria. The study recommended policies aimed at improving stock market activities and also monetary targeting as a tool for inflation control. Key words: Demand for money, Narrow Money, Broad Money, Stability Test, Unit-Root Test.

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