Appraisal of The Effect of The Global Financial Meltdown on The Nigerian Money Market

Mayowa Gabriel AJAO, Babatunde Oshobuye FESTUS


This study looked at the effect of the global financial meltdown on the Nigerian money market. To start with, it identified the major problems associated with the Global financial crisis and its effects on the Nigeria economy. As the crisis affect trade and investment flows, the Nigerian money market have so far triggered a rebound and allayed panic about the systemic financial collapse. The Ordinary Least Square (OLS) technique of regression analysis was adopted in analyzing the empirical data for Non-crisis period from 2000-2005 and the crisis period from 2006-2009 after necessary adjustment were carried out on the relevant data. Money supply/Gross Domestic Product (which stands as proxy for the impact of the Global financial meltdown) serves as the dependent variable while other money market indicators (TBs, CPs, Bas, CDs, BLR and INF) serve as the explanatory variables in the first and second models. The findings from the empirical analysis showed that in the non-crisis era (2000-2005) the explanatory variables all met apriori expectation. However, in the crisis era, only the coefficient of inflation retained its apriori sign. This implies that economic activities were adversely affected by the global financial meltdown as seen in the adverse effect on financial deepening. This in turn has a corresponding effect on the Nigerian money market, thus dis-stabilizing its indicators. This can be attributed to the failure of the Nigerian money market regulator to fulfill its primary responsibilities of supplying needed funds to critical sectors where such funds are needed during the period of financial crisis. This study therefore recommends that adequate procedures for handling systemic crisis should be drawn up promptly in preparation for contingencies. Monetary authorities should identify the vulnerabilities of the money market and safeguard its effectiveness as a means of reducing the further effects of the financial meltdown on Nigerian economy at large.

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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