摘要：This study empirically assesses the effects of money market efficiency on the development of NigerianFinancial system, using annual data collated from 1991 - 2017. The study utilizes money market variables(Interest Rate Spread, Interest Expenses, Loan/loss Provisions) as measures of money market efficiency whilereal gross domestic product (RGDP) was employed as the control variable. Financial deepening (M2/GDP) wasused as proxy for financial system development with the adoption of multivariate OLS analysis for the estimationprocess, co-integration analysis for long-run relationship and the associated error correction model (ECM) todetermine the short-run impact of the variables. The Granger causality test is used to determine the direction ofcausality among the variables. The study found that there is a significant positive relationship between moneymarket efficiency with reference to interest expense and financial system development both in the short-run andlong-run respectively; an indication that high interest expenses remain a major challenge in achieving financialsystem development in Nigeria. However, we could not establish any significant relationship between financialsystems development and other efficiency measures namely interest rate spread, and loan/loss provision. Thestudy recommends that monetary authorities should monitor the activities of banks by ensuring that they areproperly run in line with prudential regulations to improve efficiency via reduction in interest expenses, andcosts of loan/loss provision. Also, they should build capacities in the real sector of the economy to spur up thereal domestic product which is a necessary ingredient for the development of Nigeria’s financial system.
