THE IMPACT OF FINANCIAL INNOVATION ON THE DEMAND FOR MONEY IN NIGERIA

Abstract

The study investigated the impact of financial innovation on the money demand in Nigeria. The study used quarterly data for a period of forty-four quarters that is from 2010Q1 to 2020Q4, covering broad money supply, interest rate, gross domestic product, value of ATM, POS, Mobile banking and Web transactions as proxies for financial innovations. The OLS estimation technique, correlation matrix as well as the stability test was used in analyzing the data. Findings from the study reveal that VATM, VMOB and VWEB positively impact the money demand in Nigeria. VPOS transactions negatively impact the demand for money in Nigeria. Only VMOB transactions was found to be significant and positively impact money demand in Nigeria, money demand was also found to be stable based on the CUSUM and CUSUMQ tests. Therefore the study sees financial innovations as key in the development of the Nigerian monetary sector through the money demand. The study therefore recommend based on the findings that government should initiate policies and reforms that emphasizes more on the use of financial innovations mediums for transactions in Nigeria.