Universal Journal of Accounting and Finance Vol. 11(2), pp. 39 - 52
DOI: 10.13189/ujaf.2023.110202
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Financial Innovation and Demand for Money in Nigeria: Further Empirical Insights

Okey Oyama Ovat ^*, Samuel O. Abang , Okoiarikpo Benjamin Okoi , Bassey Enya Ndem
Department of Economics, University of Calabar, Calabar, Nigeria

ABSTRACT

The quest to achieve an efficient payment system that reduces the demand for money for cash transactions and other motives, and makes the economy more competitive in the global market, necessitated the introduction of financial innovation in the financial system. This paper examined the impact of financial innovation on the demand for money, searching into the nature of their relationship and evaluating the stability of the money demand function in Nigeria, to provide further empirical insights into the unresolved debate of demand for money in the Nigerian economy. The paper adopted the ARDL model to determine whether there is a long run relationship between financial innovation and demand for money; the Granger causality test, to investigate the nature of the relationship; and CUSUM and CUSUMSq to explore the stability of money demand function in Nigeria. Quarterly data from 2009q1-2020q4 were used in the analysis. A disaggregated measure of financial innovation using the value of e-payment transactions of ATM, POS, MOB, and WEB to ascertain the relative impact of each financial innovation channel on the demand for money was employed. The disaggregated approach to measuring financial innovation and examining the causality issue, constitutes the novelty and point of departure of this paper from previous studies in Nigeria. The findings showed a long-run relationship between financial innovation and demand for money existed. Also, there is the existence of a unidirectional causal relationship with causality running from broad monetary aggregate to financial innovation. The findings further revealed that financial innovation impacted demand for money positively, implying that the Nigerian economy is predominantly cash-based; and the money demand function was found to be stable in the face of financial innovation. The findings also showed that income (GDP), interest rate, and inflation are significant variables influencing the demand for money in Nigeria.

KEYWORDS
Demand for Money, Financial Innovation, Financial System, Granger Causality, E-Payment Channels

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Okey Oyama Ovat , Samuel O. Abang , Okoiarikpo Benjamin Okoi , Bassey Enya Ndem , "Financial Innovation and Demand for Money in Nigeria: Further Empirical Insights," Universal Journal of Accounting and Finance, Vol. 11, No. 2, pp. 39 - 52, 2023. DOI: 10.13189/ujaf.2023.110202.

(b). APA Format:
Okey Oyama Ovat , Samuel O. Abang , Okoiarikpo Benjamin Okoi , Bassey Enya Ndem (2023). Financial Innovation and Demand for Money in Nigeria: Further Empirical Insights. Universal Journal of Accounting and Finance, 11(2), 39 - 52. DOI: 10.13189/ujaf.2023.110202.