Digital Financial Service and Monetary Policy in Nigeria. A Toda-Yamamoto Approach

Abstract

This study examined the digital financial services and monetary policy in Nigeria for the period, 2009-2023. Based on ex-post facto research design, secondary data were obtained from the central bank statistical bulletin. The monetary policy indicator examined is monetary policy rate, while digital financial services was measured with Automated Teller Machines, point of sales web-pay. The quarterly data analyses descriptive statistics, correlation analysis and unit root by employing the Augmented Dickey-Fuller. Finally the Toda-Yamamoto Granger causality techniques was conducted. Empirically, the study indicates that there was no causality flow from Automated Teller Machine, point of sale and web-pay, to monetary policy rate in Nigeria. The study concluded that digital financial services has no connection with monetary policy rate in Nigeria. This implies that to incorporated monetary policy system in Nigeria by linking up the apparatuses of digital financial services other than LOGATM, LOGPOS and logweb-pay may be considered. Therefore, this is need to uphold the digital financial innovations by both the monetary authority, as well as the investors. Also monetary specialist should manage the monetary policy rate properly for it to be attractive and affordable for investors to borrow money from the bank. Finally, the government should employ other measures to support the monetary policy to control the credit creation of deposit money banks.