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# Data Analysis, Results and Discussions of Findings

## Presentation and Analysis of Data

Group Unit Root Test
Group unit root test: Summary
Series: TBD, MS, MPR, EXR
Date: 03/08/20 Time: 18:13
Sample: 1989 2018
Exogenous variables: Individual effects
Automatic selection of maximum lags
Automatic lag length selection based on SIC: 0 to 6
Newey-West automatic bandwidth selection and Bartlett kernel

Cross-
Method Statistic Prob.** sections Obs
Null: Unit root (assumes common unit root process)
Levin, Lin & Chu t*  6.46950  1.0000  4  110

## Null: Unit root (assumes individual unit root process)

Im, Pesaran and Shin W-
stat   4.60731  1.0000  4  110
ADF - Fisher Chi-square  7.88993  0.2463  3  81
PP - Fisher Chi-square  0.18759  0.9999  3  87

## ** Probabilities for Fisher tests are computed using an asymptotic

Chi
-square distribution. All other tests assume asymptotic
normality.
Source: Researchers Computation Eview
This test was carried out to ensure that the variables under investigation satisfy the
preconditions for the econometric techniques adopted for the study. Non-stationary variables
are not useful in economics. When a variable is non stationary it required first-order
differencing I(1) to eliminate non- stationary of variables. The procedure of the ADF and PP
test state that if the p-value of calculated ADF and PP is less than Mackinnon critical values
(5%), then we conclude that there is no unit root and thus reject the null hypothesis (H 0) and
vice versa. According to the results, it was observed that all the variables employed are not
stationary at level I(0) but found stationary at first difference I(1) since the ADF and PP test
indicated  7.88993 and  0.18759 with p-value of 1.0000 and 0.00000 respectively. We
therefore conclude that the variables are suitable for the analysis at first difference I(1).
Casualty Test
Pairwise Granger Causality Tests
Date: 03/08/20 Time: 18:13
Sample: 1989 2018
Lags: 2

## MS does not Granger Cause TBD  28  9.40284 0.0010

TBD does not Granger Cause MS  1.20184 0.3188

## MPR does not Granger Cause TBD  28  0.66212 0.5253

TBD does not Granger Cause MPR  1.78567 0.1902

## EXR does not Granger Cause TBD  28  0.98082 0.3901

TBD does not Granger Cause EXR  1.89010 0.1738

## MPR does not Granger Cause MS  28  6.04383 0.0078

MS does not Granger Cause MPR  2.12601 0.1422

## EXR does not Granger Cause MS  28  1.97138 0.1621

MS does not Granger Cause EXR  3.94766 0.0336

## EXR does not Granger Cause MPR  28  2.50613 0.1036

MPR does not Granger Cause EXR  0.96455 0.3960

## Source: Researchers Computation Eview

Granger Causality
This test is a statistical technique use for causal effect based on forecasting. Thus, it is used
to determine the causality relationship between monetary policy and the growth of Nigerian
banks. From the table above, one-way effect is found in MS/TBD, EXR/TBD and MPR/MS
at 0.0010, 0.3901 and 0.0078 respectively. This implies that money supply granger cause
total bank deposits, exchange rate granger cause total bank deposits and monetary policy rate
granger cause money supply. Therefore, there is uni-directional relationship between/among
the variables employed for the analysis.
Co-Integration Test
Date: 03/08/20 Time: 21:42
Trend assumption: Linear deterministic trend
Series: M2_GDP CPS_GDP DMB
Lags interval (in first differences): 1 to 1

## Hypothesized Trace 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

## None  0.311266  21.41822  29.79707  0.3321

At most 1  0.265521  10.97700  15.49471  0.2129
At most 2  0.080055  2.336370  3.841466  0.1264

## Trace test indicates no cointegration at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

## Hypothesized Max-Eigen 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

## None  0.311266  10.44121  21.13162  0.7025

At most 1  0.265521  8.640634  14.26460  0.3173
At most 2  0.080055  2.336370  3.841466  0.1264

## Max-eigenvalue test indicates no cointegration at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values
Source: Researchers Computation Eview
Co-Integration
This test is employed due to the fact that all the series are stationary at first difference I(1).
The TRACE and Max-Eigen statistic values at an appropriate level of significance determine
whether to accept or to reject the null hypothesis. If TRACE statistics value or Max-Eigen
statistics value exceeds the critical value, the null hypothesis is rejected and vice versa. The
result indicates 2 cointegrating equation in each test. This is because at 5 percent critical
value, the probability is higher which signifies that all the variables are cointegrated.
Consequently, long-run relationship exists between/among the variables employed for the
analysis.
Regression Results
Dependent Variable: TBD
Method: Least Squares
Date: 03/08/20 Time: 18:08
Sample: 1989 2018
Included observations: 30

## C 29.19699 158.1595 0.184605 0.8550

MS 0.131111 0.035296 3.714646 0.0010
MPR 83.54873 36.48786 2.289768 0.0304
EXR 1.045820 2.230980 0.468771 0.6431

## R-squared 0.930090    Mean dependent var 1400.849

Adjusted R-squared 0.922024    S.D. dependent var 1637.398
S.E. of regression 457.2308    Akaike info criterion 15.21182
Sum squared resid 5435561.    Schwarz criterion 15.39865
Log likelihood -224.1773    Hannan-Quinn criter. 15.27159
F-statistic 115.3026    Durbin-Watson stat 1.810449

## Source: Researchers Computation Eview

Coefficients
TBD = β0 + β1 MS + β2 MPR + β3 EXR + µ
TBD = 29.19699 + 0.131111MS + 83.54873MPR – 1.045820EXR + µ
The value of the intercept (29.19699) indicates that the total bank deposits will experience
the same values of 29.19699 while holding other variables constant. The coefficient of
money supply and monetary policy rate show positive relationship with total bank deposits.
This implies that a unit increase in money supply and monetary policy rate will increase the
value of total bank deposits by 0.131111 and 83.54873 respectively. However, exchange
rate has positive slope, and this signifies that a unit increase in exchange rate will results to
reduction in total bank deposits by 1.045820.

Coefficients of Determination
The R2 = 0.930090 which states that 93.01% of the variation in total bank deposits is
explained by the predictors (MS, MPR and EXR) while the remaining 6.99% (unexplained
variation) is influenced by other variables outside the model but captured by the error term.
Coincidently, the goodness of fit of the regression remained high after adjusting for the
degree of freedom as indicated by the adjusted R 2 of 0.930090 or 99.01%. The value is
expected to be the same or very close to R2.
F-Statistics
The f-statistics (115.3026) which measured the joint significance of the parameter estimates
was found statistically significant at 5 percent level as indicated by the corresponding
probability value of 0.000000. This implies that all the explanatory variables have influence
on total bank deposits for the period under review.

Hypotheses Testing
T-Statistic Decision Rule: The t-test is used to evaluate the significant impact of each
explanatory variable on dependent variable. Thus, if the probability value is less than 0.05
(5% critical value), we accept H1 and vice – versa

Hypothesis I:
H0: There is no significant relationship between exchange rate and the growth of banking
sector in Nigeria.
H1: There is significant relationship between exchange rate and the growth of banking sector
in Nigeria.
Decision: The probability value of exchange rate in the regression line shows 0.6431 which
is exceed 5% critical value. Thus, we accept H 0 which implies that there is no significant
relationship between exchange rate and the growth of banking sector in Nigeria.

Hypothesis II:
H0: There is no significant relationship between monetary policy rate and the growth of
banking sector in Nigeria
H1: There is significant relationship between monetary policy rate and the growth of banking
sector in Nigeria
Decision: The significant value of monetary policy rate in the regression output indicates
0.0304 which exceed 5% critical value. Thus, we accept H0 and reject H1 which states that
there is significant relationship between monetary policy rate and the growth of banking
sector in Nigeria.

Hypothesis III:
H0: There is no significant relationship between money supply and the growth of banking
sector in Nigeria
H1: There is significant relationship between money supply and the growth of banking sector
in Nigeria
Decision: The pvalue of money supply in the regression line shows 0.0010 which is less than
5% critical value. Thus, we accept H 1 which states that there is significant relationship
between money supply and the growth of banking sector in Nigeria

Discussion of Findings
The results of unit root confirmed that all the variables are not stationary at level 1(0) but
stationary at first difference I(1) since the p-value ADF and PP statistics indicate 0.2463 and
0.9999 respectively which is exceed the 5% critical value. The granger causality test shows
that one-way effect is not found in MS/TBD, EXR/TBD and MPR/MS with p-value of
0.0010, 0.3901 and 0.0078 respectively. Therefore, there is uni-directional relationship
between/among the variables employed for the analysis. The ADF co-integration procedure
was used to examine if there is any potential long run relationships between/among the
variables. The result of TRACE and Max- Eigen-statistics indicates 2 cointegrating equation.
Thus, there is long run relationship among the variables employed for the analysis.

The t-statistic reported that money supply and exchange rate have significant impact on total
bank deposits while monetary policy rate is statistical significant at 5% critical value. The
findings also show that the adopted explanatory variables best explains the model with the
high value of the R2 at 93.01%. The f statistics indicates the overall significance of the
adopted explanatory variables and the result confirmed that the model is highly significant,
because the probability value (0.000000) is less than 5% critical value. Thus, monetary policy
played a crucial role in the growth of Nigerian banks for the period under study.
APPENDIX I
THE EFFICACY OF MONETARY POLICY INSTRUMENTS ON ECONOMIC
GROWTH IN NIGERIA
Total
Money
Bank Monetar
Supply
Year Deposit y Policy EXR
(N’Billio
(N’Billion Rate
n)
)

## 1992 6.23 111.11 0.00 17.2984

3
1993 8.88 165.34 0.00 22.0511
4
1994 7.27 230.29 0.00 21.8861
2
1995 2.30 289.09 0.00 21.8861
5
1996 6.07 345.85 0.00 21.8861
4
1997 5.10 413.28 0.00 21.8861
5
1998 7.68 488.15 0.00 21.8861
20
1999 1.49 628.95 0.00 92.6934
34
2000 4.89 878.46 0.00 102.1052
38
2001 6.45 1,269.32 0.00 111.9433
46
2002 0.23 1,505.96 0.00 120.9702
50
2003 0.43 1,952.92 0.00 129.3565
66
2004 9.07 2,131.82 0.00 133.5004
72
2005 6.23 2,637.91 0.00 132.1470
88
2006 2.85 3,797.91 10.00 128.6516
1,41
2007 0.04 5,127.40 9.50 125.8331
1,48
2008 2.16 8,008.20 9.75 118.5669
1,27
2009 4.58 9,411.11 6.00 148.8802
2,60 11,034.9
2010 5.01 4 6.25 150.2980
3,79 12,172.4
2011 0.90 9 12.00 153.8616
3,58 13,893.2
2012 0.42 2 12.00 157.4994
3,29 15,154.6
2013 3.83 4 12.00 157.3112
3,98 16,238.5
2014 2.72 2 13.00 158.5526
3,28 18,525.2
2015 4.01 2 11.00 193.2792
3,73 21,624.6
2016 6.02 3 14.00 253.4923
5,35 22,363.4
2017 1.80 3 14.00 305.7901
3,76 25,079.7
2018 8.58 2 14.00 306.0802
Source: CBN Statistical Bulletin 2018 Financial Sector

APPENDIX II
Group unit root test: Summary
Series: TBD, MS, MPR, EXR
Date: 03/08/20 Time: 18:13
Sample: 1989 2018
Exogenous variables: Individual effects
Automatic selection of maximum lags
Automatic lag length selection based on SIC: 0 to 6
Newey-West automatic bandwidth selection and Bartlett kernel

Cross-
Method Statistic Prob.** sections Obs
Null: Unit root (assumes common unit root process)
Levin, Lin & Chu t*  6.46950  1.0000  4  110

## Null: Unit root (assumes individual unit root process)

Im, Pesaran and Shin W-stat   4.60731  1.0000  4  110
ADF - Fisher Chi-square  7.88993  0.2463  3  81
PP - Fisher Chi-square  0.18759  0.9999  3  87

## ** Probabilities for Fisher tests are computed using an asymptotic Chi

-square distribution. All other tests assume asymptotic normality.
APPENDIX III
Pairwise Granger Causality Tests
Date: 03/08/20 Time: 18:13
Sample: 1989 2018
Lags: 2

## MS does not Granger Cause TBD  28  9.40284 0.0010

TBD does not Granger Cause MS  1.20184 0.3188

## MPR does not Granger Cause TBD  28  0.66212 0.5253

TBD does not Granger Cause MPR  1.78567 0.1902

## EXR does not Granger Cause TBD  28  0.98082 0.3901

TBD does not Granger Cause EXR  1.89010 0.1738

## MPR does not Granger Cause MS  28  6.04383 0.0078

MS does not Granger Cause MPR  2.12601 0.1422

## EXR does not Granger Cause MS  28  1.97138 0.1621

MS does not Granger Cause EXR  3.94766 0.0336

## EXR does not Granger Cause MPR  28  2.50613 0.1036

MPR does not Granger Cause EXR  0.96455 0.3960
APPENDIX IV
Date: 03/08/20 Time: 21:42
Trend assumption: Linear deterministic trend
Series: M2_GDP CPS_GDP DMB
Lags interval (in first differences): 1 to 1

## Hypothesized Trace 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

## None  0.311266  21.41822  29.79707  0.3321

At most 1  0.265521  10.97700  15.49471  0.2129
At most 2  0.080055  2.336370  3.841466  0.1264

## Trace test indicates no cointegration at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

## Hypothesized Max-Eigen 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

## None  0.311266  10.44121  21.13162  0.7025

At most 1  0.265521  8.640634  14.26460  0.3173
At most 2  0.080055  2.336370  3.841466  0.1264

## Max-eigenvalue test indicates no cointegration at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values
APPENDIX V
Dependent Variable: TBD
Method: Least Squares
Date: 03/08/20 Time: 18:08
Sample: 1989 2018
Included observations: 30

## C 29.19699 158.1595 0.184605 0.8550

MS 0.131111 0.035296 3.714646 0.0010
MPR 83.54873 36.48786 2.289768 0.0304
EXR 1.045820 2.230980 0.468771 0.6431

## R-squared 0.930090    Mean dependent var 1400.849

Adjusted R-squared 0.922024    S.D. dependent var 1637.398
S.E. of regression 457.2308    Akaike info criterion 15.21182
Sum squared resid 5435561.    Schwarz criterion 15.39865
Log likelihood -224.1773    Hannan-Quinn criter. 15.27159
F-statistic 115.3026    Durbin-Watson stat 1.810449