ISSN 2222 -1700 (Paper) ISSN 2222 -2855 (Online) [621975]

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The Interest Rate Deregulation and Bank Lending in Nigeria

Dr. Uche Ugwuanyi
Department of Accountancy, Enugu State University Of Technology, Enugu, Enugu State Of Nigeria

Abstract
This study examined the interest rate deregulation and bank lending in Ni geria within the period of 1987 to 2011.
The study was carried out to show the relevance of the hinges on the fact that credit and its costs (interest)
perform a private role in shaping the economic future of Nigeria. The ordinary least square (OLS) techni ques
were utilized to estimate the parameters of the modeled independent variables/regressors on our chosen
dependent variable. The hypothesis that the interest rate deregulation has a significance impact on bank lending
was tested and validated with the r esult. Our findings gave rise to statistically significant t -statistics, which
confirms the effects of the independent variables on the dependent variables. Some of the recommendations to
further accelerate growth of the banking sector are more efforts to recommend that government through central
bank should implement stringent fiscal and monetary policies aimed at reducing inflation. Others include that
banks have been over -reacting to interest measures by increasing the rates to unprofitable levels especi ally
during the period of deregulation.
Keywords: Interest rate, deregulation, bank lending

1. Introduction
One of the most regulated sectors in the Nigerian economy is unarguably the banking industry. The reason
includes the use of intervention by autho rities to short comings of the price fixing mechanism in the capitalist
system to ensure what is commercially rational for an industrial bank, approximate social rationality.In the
determination of interest rate it banks and their customers are free to neg otiate to arrive at the suitable interest
rate on both loans and advances. Despite the regulation, a number of challenges still arose. The approach to
banking was the use of direct control by the central bank. The degree of compliance varied among banks. A t
times, withdrawal of privilege or facilities was the case with banks that failed for comply, for example most
banks defaulted on ceilings imposed credit expansion and allocation on sectional basis (Ibimodo, 2005).
Interest rates are defined as the rental payment for the use of credit by borrowers and return for parting with
liquidity by lenders, (Ibimodo, 2005). Like other prices, interest rates perform a rational function by allocating
limited supply of credit among the many competing demands. In the (19 87) budget announcement of the then
president, General Ibrahim Babangida, it was observed that the pegging of interest rate contrary to expectation,
commercial banks encourage savings and since investments are made out of savings, the establishment of
comm ercial especially in rural areas makes savings possible, hence economic development is accelerated
(Anyanwu 1997).
Socially, interest rate charged by banks could be regulated to encourage savings mobilization, ensure and
foster adequate investment for rapi d growth and development, bearing in mind the view of (Goldsmith 1969) that
the financial superstructure of an economy, accelerates economic performance to the extent that it facilitate the
migration of funds to the funds yield the highest social return.
Under the deregulated interest rate system, the market forces of demand and supply plays a very prominent
role and investment is inconclusive (I.Adofu 2007). Central bank is trying to deregulate the interest rate aim at
strangulating a lot of industries par ticularly the small and medium scale industries, because interest rate
deregulation will lead to a very high lending rate, and the medium scale industries could not afford because of
their limited capital and production base (Ani, 1988).

2. Literature Rev iew
Interest rate is the reward for parting with liquidity, for a specified period. According to Ologu (1992) in a study
of the impact of CBN monetary policy in “Aggregate investment Behavior” found that interest rate was
significant in influencing investm ent decision, noting that this is not surprising since it is a situation of limited
resident funds, as in Nigeria, the cost of capital should exert significant influences on both the frequency and
volume of demand for investible funds by investors.

2.1 In terest Rate Deregulation in Nigeria
Because of the counterproductive nature of the pervasive controls, one of the aims of SAP, was financial
liberalization and deregulation, and in general the reduction of complex administrative control and
encouragement o f greater reliance on market forces. In determine interest rates credit allocation and even the

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conduct of monetary policy.
According to Iyoha (1996), said that with financial liberalization which was introduced under the auspices
of SAP, the Central Bank of Nigeria (CBN) was no longer expected to set ceilings on interest rates or directly
control credit under the new dispensation. It was expected that financial intermediates would be left free to
administer credit and that the interest rate would be determ ine d by market forces of supply and demand. Thus,
the ultimate objective of financial liberalization under SAP was to bring about improved financial intermediaries;
enhance the role of banks in effectively mobilizing domestic savings and optimally allocat ing investable
resources. Thus enabling them to play this historic role as an engine of economic growth.
According to Anyanwu (1994), he said the prescription was necessitated by the observed rapid increase in
bank lending rates in 1989 and 1990 in spite o f a fall in inflation rate and expansion in domestic liquidity in 1992.
However, this increase was removed, thus leaving all interest rates still to ally deregulated. It is also important to
note that in 1989, the policy of paying interest on current accou nt deposit was introduced and made mandatory in
1990.
According the central bank statement issued in (1989) set some guidelines on the speeds of banks average
cost of funds their maximum lending rates as well as minimum level of saving deposit rates. This prescription
was necessitated by the rapid increase in bank lending rates.
Also, according to inside business, May (2004), the Nigeria economy, however appears that interest rate
destined to climb and keep climbing the price ladder with the attendant woes of low capital utilization, poor
borrowing capacity by genuine investors, declining small scale participation, high cost of production, raising cost
of basic necessities and a general fall in the living standards. Worried by the high interest prevailing an d the
country, the federal government and banks met in April 2002 and made a joint agreement that would bring the
monstrous rate clown. Based on this tripartite accord, CBN agreed to fix a minimum rediscount rate (MRR) to
20.5% in which commercial banks we re not to raise their interest expect with an additional 4% administrative
charge. The federal government, on its part was to create an enabling environment for the survival of the
agreement through the provision of infrastructure such as uninterrupted pow er supply, cheaper
telecommunication and security official lending rate which was pegged at 19%, while government will aid
bringing down lending rate by reducing cost of placement of its funds to 5%.
Early in the SAP implementation, interest rate deregulat ion was accepted as a major element of financial
liberationzation. Thus, early in 1987, the interest rate structure was adjusted upward as a means of improving the
efficiency of the financial system in mobilizing saving and improving resources allocation. However, the
principle of maintaining a minimum level of interest rate on savings and time deposits and a maximum lending
rate was refunded. However, in August 1987, controls on interest rates were removed and the central bank
adopted the policy of fixing only its minimum discount rate to indicate the desired direction of interest rate
charges.
In terms of this study, interest rate will be defined as the return or opportunity cost of determining current
consumption into the future.
The ideal of real interest rate was developed by Irvin Fisher when he tried to establish the relationship
between consumption and investment. They are crucial in financial intermediation which involves transferring
from surplus to deficit units in an economy.
According to Balassa (1989) as well as Arrita (1988) reviewed the literature on interest rates in developing
countries as well as its effect on savings and concluded that even though most studied have indicate a positive
relationship between savings and interest ra tes, they are inconclusive on whether saving is significantly affected
as a result of data measurement and exclusion of appropriate lag structure.
The World Bank (1989) has viewed that positive interest rates and liberalization can help to promote
growth. The relevant question here is do positive interest rate effect apply to growth or also to investment or to
savings the world confirms a positive effect of real deposit rate on investment and growth but no significant
effect on savings.
According to Rama (1990) investigated the theoretical and empirical determinant of private investment in
developing countries and identified that macroeconomic and institutional factors such as financial repression,
foreign exchange shortage, lack of infrastructure, economi c instability as important variables that explaining
private investment. Rama not that the empirical results occurrences were diminished by errors measurement of
economic variables and reassert methodology.
According to Agu (1988) reviewed the determinant and structure of interest rates in Nigeria and noted the
existence of very low minimal and negative effect of low interest rates on savings and investment using the usual
McKinon financial repression diagram. His main conclusion was that the relationship b etween real interests and
savings is inconclusive.
Agu’s conclusion based on theoretical analysis prompted Reichel (1991) to investigate the empirical

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relationship between, the real interest rate and saving in Nigeria.
According to Ayanwu J.C (1994) analys ed the effect of real deposit interest rate on savings rate and
investment rate for Nigeria between 1986 and 1994. The regression result confirmed the effect of real interest
rates on growth but there is no significant effect for savings and investment rat es. The effect is negative for both,
albeit insignificant. This is however surprising when the correlation between the GDP growth rate and savings
and investments is examined: 0 -19 and -).25 respectively for the period 1986 -1994.

2.2 Theories of Int erest Rate
The theory of interest rate is very controversial. This is indicated by the diverse attempts made by economists
over the last one hundred years to develop an acceptable theory of interest rate. The various theories that have
been developed are d ifficult to classify although it is possible to trace the chronological order of the development
of these theories from pre -classical to the classical through the neo -classical. (Loanable Funds). The Keynesian
version and finally heading to the Hick genera l equilibrium approach and the monetarist view on interest rates.

2.3 The Classical Theory of Interest Rate
This theory is associated with the name of David Ricardo, Marshall, Piggon, Cassels, Walras, Tansing and
Knight. According to the classical theory , rate of interest is determined by the interaction of demand and supply
of capital or to be more accurate, by the intersection of the investment demand schedule and the savings schedule.
It could also be stated that the interest rate is determined by the equality of savings and investment under the
condition of perfect competition. The rate of interest is constructed be the balancing factor, which equates the
volume of savings with the volume of investment. There is an inverse relationship between the rate of interest
rises, the demand for capital declines. In the same manner, if the rate of interest falls, the demand curves for
capital rises. That is why the demand curve for capital slopes downward from left to the right.
The supply of capital on the other hand, at any particular time depends on a number of factors. An
important factor influencing the supply according to the classical economists is the rate of interest. The public
saves more at a higher rate than at a lower rate. This is why the supply curv es of capital slopes downwards.
The classical economists believed that the rate of interest must be high enough to induce the saver to forego
consumption. If the public saves less, the total supply of capital will fall short of the total demand and intimat ely
the rate of interest will have to rise high enough to compensate the saver.

2.4 The Neo -Classicals Or The Loanable Funds Theory Of Interest Rate
The neo -classical or the loan -able funds theory of interest was first pro -founded by the Swedish economi st
Wicksell and later developed and supported by several leading American and Swedish economists including
professor Robertso, Bertil, Lindhal and Mydal (Seth 1983). However, the theory in it present form is associated
with Professor Robertson. According t o the theory, the rate of interest of determined by the demand and supply
of loan able funds and those who borrow them the rate of interest will be such as shall bring about equilibrium
between, the demand and supply of loan able funds. The loanable funds are wide in scope and include not only
savings out of current income but also bank credit, dis -hoarding and dis -investment. The classical theory of
interest rate refers only to saving out of investment. And current income, they do not include bank loans, w ealth
or disinvested assets actually; bank loans represent important funds which are available on payment of interest to
the borrowers. Likewise, hoarded wealth can also become available for the purpose of investment Dis -invested
wealth is another source o f funds available to the borrowers since the loanable fund theory is more
comprehensive, it is often referred to as real as well as monetary theory of interest. This theory is one of two
general approaches that have been followed in developing the modern monetary theory of the rate of interest.

2.5 Keynes Liquidity Preference Theory of Interest
As opposed to classical theory, which might be termed as the real theory of interest, Keynes after criticizing the
classical theory propounded his own, theor y of interest. This Y may also be called the monetary theory of
interest because according to this theory, the rate of interest can be controlled through variations in the supply of
money. According to Keynes, interest is purely a monetary phenomenon becau se the rate of interest is calculated
in terms of money. It is also a monetary phenomenon in the scene that it is determined by the demand for and the
supply of money. Keynes defined interest as the reward paid for parting with liquidity for a specified ti me. He
was further to state that money is the most liquid asset and people generally like to keep their assets in cash.
Therefore, if they are asked to surrender this liquidity, they most be paid a reward.
This is paid in the form interest. The greater the desire for liquidity, the higher shall be the rate of interest
demanded for parting with liquidity.

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2.6 Demand Side
Like the price of an ordinary commodity, the rate of interest is determined by the supply and demand of money.
According to Keynes, th e rate of interest of governed by the liquidity preference of the community. The liquidity
preference arises due to necessity of keeping adequate cash for meeting curtaining requirements. Keynes
discussed these requirements under the headings namely:
a. The t ransaction motives
b. The precautionary motive
c. The speculative motive
The demand for money arising under these motives constitutes the aggregate demand for money. It should
however be remembered that the demand for money in the Keynesian sense is the demand to hold money.

2.7. Can We Have A Strong Naira And A Low Interest Rate At The Same Time, When Inflation Is High And
Rising
Exchange interest and inflation rates are fundamental macroeconomic variables, capable of changing the director
and growth pattern of a country’s economic development and stability. Several factors determine the value of
any country’s currency. These includes speculation, trade and current account balances, the relative price level,
the productivity growth of the economy both at home and abroad; the growth in spending decision; the export
base of the economy, the relative cost of credit (interest rate) in the country and foreign decisions.
To appreciate the need to fight inflation, it is imperative to understand the implications of fr equency price
increases in the Nigerian system. Some of these implications include:
1. Discouragement of long term planning
2. Reduction of savings and capital accumulation
3. Reduction of investment
4. Creating uncertainty and distortions in the economy
5. Increase in the cost of financing bank loans and advances.
This because of the inverse relationship between inflation and real interest rates; a high and rising
inflation rate has bee show to have reduce the domestic real rate of interest and currency value.

2.8 N igeria: Inflation and the State of the Economy
Recently, a good and encouraging record trick led from national Bureau of Statistics that inflation rate receded to
9.4% in July, the lowest so far in three years. This is a significant improvement from persis tent inflation that was
surging upward that compelled the central bank of Nigeria (CBN) to aggressively tighten monetary policy. As of
June, the inflation rate stood at 10.2% and this made the Sanusi’s CBN to raise the interest rate to 8.75%. There
is no d oubt that the monetary policy of restraining and mopping up liquidity at the monetary base aided to slow
down the raising inflation.
Financial writer (This day), Obinna Chima observed that “The CBN had always expressed disdain for
double. Digits inflation rate in the country this has been the apex bank’s monetary policy committee (MPC),
adjusting various monetary policy instruments to achieve that ambition. The MPC which has operational
independence in setting of interest rates in the country had increased the benchmark interest rate – the monetary
policy rate (MPR) four times since the beginning of 2011. the benchmark interest was raised from 6.5% in
January to 7.5% in March, 8% in May and to 8.7% at the July meeting other monetary policy tools such as cash
reserve requirements (CRR) has also been reviewed upward.
The increasing of interest rate of dry up the market excessive liquidity in order to achieve the desired goal
of restraining inflation may have a reverse effect at some point. As the interest rate increases, it will dampen
economic growth by making the availability of credits and loans to tighten. The scenario may once again usher
in credit crunch and the financial flow of liquidity in the capital market. This is not the result that CBN is trying
to achieve, that is why a comprehensive outlook is needed to continuously wrestle down inflationary trends.
When the interest rate was raised to 8.75% at the end of CBN’s monetary policy committee (MPC) session,
it issued a statement that “the committee obse rved that the inflation outlook appears uncertain owning to the
expected implementation of the new national minimum wage policy and the imminent deregulation of petroleum
prices. Significant inject of liquidity from FAAC in the third quarter coupled with t he impact of AMCON
recapitalizing intervened bank to the tune of N1.6 trillion will both add the inflationary pressures”, consequent
on increased in interest rate which will definitely affect bank lending in the commercial banks. That is
supposedly the cas e but is not the whole story; the excessive government spending and borrowing played a role
to state of inflation.
Budget deficits operated by Nigerian federal government has its attendant woes. These deficits are financed
through debt which is sourced mor e domestically through commercial banks by issuing securities. This reduced

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availability of loans for private investors and individuals and consequently lead to credit crunch in the banking
sector, the result is high interest rate which stands between 19% to 20%.
But there are also coming attractions to the economy according to (Samir Godioo), an emerging market
strategist at standard bank group ltd that makes outlook on inflation “uncertain”:. Those coming attractions
include the doubling of the monthly mi nimum wage to 18,000 naira ($116) and to deregulate fuel prices, central
bank governor Lamido Sanusi Said. Core inflation, which excludes food, will probably accelerate in the second
halt of the year. “These activities have the propensity to increase infla tion.

3. Model Specification
Since our objective in this research study is to undertake an empirical investigation of interest rate deregulation
and its effect on bank lending in Nigeria, we therefore specify the model thus;
Theoretical function specific ation:
BLE = F (MS, INTR, MRR, TBD, INFL)
Where
BLE = Bank Lending
MS = Money Supply
MRR = Marginal Rediscount Rate
TBD = Total Bank Deposit
INFL = Inflation rate
GDP = ﻻ 1+ ﻻ 2 BLE + ﻻ 3 MS + ﻻ 4 INTR + ﻻ 5 MRR + ﻻ 6 TBD + ﻻ 7 INFLR + μ
μ = Stochastic term:
(ﻻ 1>0, ﻻ 2>0, ﻻ 3<0, ﻻ 4<0, ﻻ 5<0, ﻻ 6<0, ﻻ 7<0)
The variables included as explanatory variables in the model are meant to capture bank lending generally
and indi vidually. However, emphasis will be on interest rate deregulation as it affects bank lending in Nigeria.
Money supply on a priority is expected to have a possible affect on bank lending since it’s believed that increase
in money supply would enhance the cr edit creating ability of commercial banks thus increasing the amount of
loans and advance to non banking public.
Similarly, total bank deposit, (TBD) which incidentally is a combination of demand deposit, time deposit
and savings deposit is envisaged to im pact positively on bank lending.

3.1 Presentation of Regression Result
The use of the ordinary least square (OLS) method in estimating the parameters of the model specified in the
previous chapter produced the following result extracted from appendix 1.
TIME SERIES REGRESSION MODEL EQUATION:
BLE = F (MS, INT, MRR, TBD, INFL)
Where:
BLE = Banks Lending
MS = Money Supply
INT = Interest Rate
MRR = Marginal rediscount Rate
TBD = Total Bank Deposit
INFL = Inflation Rate
The dependent variable is Banks lending while the independent variables are, money supply interest rate,
marginal rediscount rate, inflation rate, total bank deposit.
In the study, the following results were obtained from the regression analysis using ordinary least square
estimation (see table 1).

3.2 Interpretation of Results
The model: BLA= α 0 + α 1 LR + α2 CRR + α3TBD + α4 GDP + ei
The equation:

(-0.88) (1.01) (0.91) ( -5.81) (25.32)
R2 = 0.97
Ŕ 2 = 0.96
F-stat = 191.91
Dw-stat = 2.31
NB: The t – ratios are in parenthesis u nder the coefficient of each variable.

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An overview of the ordinary least square (OLS) regression above indicates that the dependent variable
Banking Lending and Advances (BLA) has varying degree of relationship with the explanatory variables
Lending Rate (LR) Cash Reserve Ratio (CRR) , Total Bank Deposit (TBD) and Gross Domestic Product (GDP)
while, it is positively related with LR, CRR and GDP, it is negatively related to TBD: The result shows that
about 97% of the total systematic variation in the depend ent variable (BLA) have been explained by all the
explanatory variables taken together this is indicated by the coefficient of determination (R2) of 0.97 and after
adjusting for the degree of freedom the model could still explain about 96% of the total sys tematic variation in
BLA as shown by the adjusted co efficient of determination (Ŕ2) of 0.96. This means that only about 4% of the
total systematic variation in BLA was not capture by the model, but captured by the stochastic error term.
On the basis of the overall statistical significant of the model as ind icated by the F -statistics, it was observed
that the overall model was statistically significant since the calculated F -value of 191.91 is very high and
significant at 1% level of significant. This means that there is a significant linear relationship betw een the
dependent variable (BLA) and all the explanatory variables.
Based on the individual statistical significance as indicated by the t -ratios of the explanatory variables. Only
TBD and GDP are statistically significant at 1% level with calculated t -ratios of -5.81 and 25.32 while LR and
CRR with calculated t -ratios of 1.01 and 0.91 are not statistically significant at either 1%, 5% or 10% level. This
means that only TBD and GDP have significant impact on BLA during the period under consideration.
The re lationship between the dependent variable and the explanatory variables is indicated by the
coefficient of each of the explanatory variable. A unit increase in LR will increase BLA by 17306.1, while a unit
increase in CRR will increase BLA by 27961.9. Howe ver a unit increase in TBD will decrease BLA BY 3.3;
while GDP is significantly and positively related to BLA as a unit increase in GPD will increase BLA by 0.27.
The Durbin Watson (DW) statistics of 2.3 can be approximated to 2 is an indication of the abs ence of auto
correction.

3.3 Policy Implementation
Based on the above regression results explanatory, the explanatory independent variables namely, ending rate,
Cash Reserve ratio, Total Bank Deposit and Gross Domestic Product have different degree of re lationship on the
dependent variables Bank Lending and Advances (BLA), hence its implications.
1. Lending Rate (LR) has positive relationship with BLA such that a unit increase in lending rate will result
(LR) will result in 17306.1 unit changes in BLA in the same direction.
2. Cash Reserve Ratio (CRR) has a positive relationship with BLA such that a unit increase in CRR will result
in 27961.91 unit change in BLA in the same direction.
3. Gross Domestic Product (GDP) also has a positive relationship with BLA such th at a unit increase in GDP
will result in 0.273271 unit change in BLA.
4. Total Bank Deposit (TBD) ahs a negative relationship with BLA such that a unit change in TBD will result
in 3.302101 unit change in BLA in the opposite direction.
Because of the individ ual significant test results, a close look will show that interest rate which is a
monetary tool, is used by monetary authorities has a great tendency of impacting on the general welfare to the
economy. Other variables namely money supply, marginal redisco unt rate, Bank Lending, Total Bank deposits
and inflation rate are closely linked with interest rate.
It is therefore imperative for the monetary policy authorities to set optimum interest rate which will
stimulate greater savings that can be ch anneled to loans for investments purposes. Low interest rate could lead to
inflation and consequently low purchasing power in the value of money.
Likewise, high interest rate could lead to idle funds and consequently capital resources under utilization
which will affect the general economic condition.
What needs to be done is to set an optimum interest rate and other rates should be allowed to find their
levels. Other determinants like minimum rediscount rate and money supply are tools used for inter -bank
transaction from the central bank to the commercial banks and money supply is used to boost demand when
there is shortage of money in circulation.
To this end, interest rate should be deregulated, banks should determine their rates, and this will bring out
competitiveness, efficiency and effective use of resources. Central bank on its own should serve as watchdog
monitoring the activities of commercial banks to ensure price stability, capital utilization and attainment of full
employment which will boost the gross domestic product.

4. Summary of Findings
A summary of the findings show that:
1. Lending rate (LR) has a positive relationship with Bank lending and Advances (BLA) such that a unit

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change in lending rate (LR) will result in 17306.1 units change in BLA In the same direction.
2. Cash Reserve Ratio (CRR) has a positive relationship with BLA such that a unit change in CRR will result
in 27961.91 unit change in BLA in the same direction.
3. Total Bank Deposit (TBD) has a negative relationship with BLA such tha t a unit change in TBD will result
in 3.302101 unit change in BLA in the opposite direction.
4. LR and CRR are not statistically significant at 1%, 5%, and 10% level with a calculated t -ratio of 1.01 and
0.91.
Instability in prices i.e. inflation ratio or rat e has been undermining deposit which has resulted only real assets
rather than financial assets. Other financial institutions like merchant banks pay higher deposit rates, which
necessitates commercial banks to shift from retail to wholesale. Banking lendi ng rate have generally remained
below market clearing level, government policy regarding open market operations including its stabilization
securities have had serious consequences an commercial banks ability to extend more loans and advances to
investors.

5. Recommendations
Having looked at the problems that have besieged banks before and after deregulation, coupled with the findings
from estimation, the following recommendations become necessary in ensuring the growth of the banking sector.
1. Since the lev el of inflation had been undermining the ability of banks to use their deposit rate to attract
financial resources, it is therefore recommended that governments through central bank should implement
stringent fiscal and monetary policies aimed at reducing inflation. This will increase the real value of money
and hence, a greater response for the public to interest rate changes.
2. Banks have been over -reacting to interest measures by increasing the rates to unprofitable levels especially
during the period of deregulation. Thus Banks have to pursue policy that would relief them from ruinous
competition, by summing at maintaining the rates between certain limits as prescribed by central bank. This
is quite necessary as banks cannot predict future events that would affect them.

6. Conclusion
In conclusion, this study showed that commercial banks deposits and profits been responsive in one way or the
other to interest rate policy.
Attempts have been made in course of the study to explain the phenomena, the impl ications of the response
of deposits and loans and advances to interest rate policies is that interest rates should be facture to encourage
financial savings without discouraging loans and advances for investment purposes. Therefore, interest rate
policy a s well as other factors such as, economic stability, investment opportunities and the economic
environment should be as curtained to enable financial resources to be channeled to productive investment.

References
Agu, C.C. (1988): “Interest rates poli cy in Nigeria and it attendant distortions” savings and development vol. XII,
No. 1pg. 19 -33.
Anayanwu, J.C. (1993): Monetary Economics: Theory Policy and Institutions. Hybrid publishers Ltd.
Anayanwu, J.C. (1995): “Structural Adjustment Programme, Financ ial Deregulation: The Nigeria Case “The
Nig. Economic and Fin Review Vol. 1, No.1, June.
Iyoha, M.A. (1996): O.M.O and the Efficacy of monetary policy in Nigeria: The Nigeria Economic and
Financial review Vol. 1 No. 1 (June).
Iyoha, M.A: An Econometric Ana lysis of main determinants of Nigerian money supply. Nigerian Journal; of
Economics and Social Sciences pg. 281.
Keynes, J.M. (1973): The General Theory of Employment, Interest and Money Collected Writing vol.2.
Macmillan London.
Ojo, M.O. (1991): “Deregul ation in Nigerian Banking Industry” A review and Appraisal CBN Economic and
Financial Review vol. 29 No. 1 March.
Rama, M. (1990): “Empirical Investment Equations in Developing Countries”: World Bank Working Paper No.
563, December.
Ojo, M.O. (1991): “Dere gulation in Nigerian Banking Industry” A review and Appraisal CBN Economic and
Financial Review vol. 29 No. 1 March.
Central Bank of Nigeria, Statistical major economic and financial indicator, research department, 1996. June.
First Bank Plc, annual report s 1980 -1997.
Union Bank Plc, annual report 1980 -1997

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TABLE 1
REPORTING OF RESULT
Dependent Variation: VLA
Method: Least Squares
Date: 07/18/12 Time: 15:46
Sample: 1981 2009
Included observation: 29

Variable Coefficient Std. Erro t-Statistic Prob.

C -348067.2 396072.1 -0.878797 0.3882
LR 17306.1 17132.96 1.010106 0.3225
CRR 27961.91 30663.02 0.91191 0.3709
TBD -3.302101 0.56869 -5.8065 0
GDP 0.273271 0.010794 25.31809 0
R-squared 0.969683 Mean dependent var 1132941
Adjusted R -squared 0.964 631 S.D. dependent var 2255720
S.E. of regression 424227.4 Akaike info criterion 28.90951
Sum squared resid 4.32E+12 Schwarz criterion 29.14525
Log likelihood -414.1879 Hannan -Quinn criter 28.98334
F-statistic 191.9116 Durbin -Watson stat 2.308228
Prob (F-statistic) 0