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Periodical article | Leiden University catalogue | WorldCat |
Title: | Response of financial intermediaries to interest rate differentials and implications for monetary policy administration in Nigeria |
Author: | Ogiogio, G.O. |
Year: | 1989 |
Periodical: | African Review of Money, Finance and Banking - Supplement to 'Savings and Development' |
Issue: | 1 |
Pages: | 35-51 |
Language: | English |
Geographic term: | Nigeria |
Subjects: | monetary policy interest rates |
External link: | https://www.jstor.org/stable/23025889 |
Abstract: | This paper examined the implications of interest rates correlation, and premium on rates differential, for monetary policy administration in Nigeria where the principal interest rates are significantly influenced by the monetary authorities, and found that the absence of perfect correlation of rates implies adjustments for exogenous influences in the economy - particularly price and credit risks. Adjustments are made but not sufficient to compensate for price risk let alone the rising credit risk characteristic of deficit spending units. Nevertheless, the average investor on financial assets in Nigeria is not adequately compensated. The paper also found that the behaviour of the interest premium earned by financial intermediaries is a good indicator of the effect of monetary policy channelled through variations in the rediscount rate and this can be adequately controlled by varying the differential between the rediscount and treasury bills rates even with the deregulation of the money market. On the basis of these findings, the paper averred that the interest rate is an important monetary policy instrument, contrary to findings arising from the estimation of the liquidity preference function for the Nigerian economy. The data used for the study are the annual minimum interest rates for the period 1970-1985. Bibliogr., notes, ref., sum. also in French. |