TABLE OF CONTENTS
Title page
Abstract
Table of Contents
CHAPTER ONE: INTRODUCTION
1.1 Background to the Study
1.2 Statement of the Problem
1.3 Research Questions
1.4 Objectives of the Study
1.5 Research Hypotheses
1.6 Significance of the Study
1.7 Scope of the Study
1.8 Organization of the Study
CHAPTER TWO: LITERATURE REVIEW AND THEORETICAL FRAMEWORK
2.0 Introduction
2.1 Conceptual Literature Review
2.1.1 Concept of Financial Intermediation
2.1.2 Overview of financial intermediation in Nigeria
2.2.0 Treasury Bills
2.2.1 The Nigerian Treasury Bills
2.2.2 The market for Treasury Bills in Nigeria
2.2.3 The Demand for Treasury Bills in Nigeria
2.3 Theoretical Literature
2.3.1 Intermediation Model
2.3.2 Information Asymmetry: Adverse selection and moral hazard
2.3.3 Risk diversification Hypothesis
2.3.4 Lazy Bank Model
2.3.5 Portfolio Management Theory
2.3.6 Shiftability Theory
2.3.7 Commercial Loan Theory
2.4 Empirical Literature
2.5 Theoretical Framework
2.6 Analysis of Deposit Money Banks Consolidated Assets
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Analytical Framework
3.2 Model Specification
3.3 Estimation techniques
3.4 Types and Sources of Data
CHAPTER FOUR: DATA ANALYSIS AND DISCUSSION OF RESULTS
4.1 Trend Analysis
4.2. Unit Root Test
4.3 Co-integration Test
4.4 VAR Stability Test
4.5 Vector Error Correction Estimates
4.6 Impulse Response Function
4.7 Variance Decomposition
4.8 Summary of Findings
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
5.2 Conclusion
5.3 Recommendations
References
Appendices
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.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
With regards to the rising government deficit in Nigeria, the Nigerian government, while having several other financing options such as running down its cash reserves, selling some of its assets like properties or printing more currency (ways and means advances), has heavily relied on short term borrowing from the banking system – more specifically by means of Treasury Bills.
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