Gauging the Effects of Modern Payment Technologies Adoption on the Demand for Money in Nigeria
Gauging the Effects of Modern Payment Technologies Adoption on the Demand for Money in Nigeria

Summary/Abstract: In contrast to the global intermediate goals of monetary policy, “financial exclusion” remains prevalent. Therefore, using the Nigerian economy as a point of reference, this paper attempts to shed more light on the role played by modern payment technologies in promoting financial inclusion, especially as it relates to the provision of currency in the hands of the Nigerian public for liquidity services during the period 2009:Q1 to 2017:Q4. In actualizing this objective, the Johansen cointegration method is employed to test for cointegration alongside vector error correction modeling (VECM) techniques, while the Gregory-Hansen cointegration method is employed to test for structural breaks and regime shifts. Subsequently, empirical results from the Johansen cointegration test and the normalized cointegrating coefficients of the estimated vector error correction model (VECM) reveal that real currency in the hands of the Nigerian public is positively cointegrated with real modern payment technologies transactions as well as real Gross Domestic Product (GDP), but negatively cointegrated with real savings interest rates, real quarterly time deposits interest rates, and inflation rate. On the other hand, empirical results from the Gregory-Hansen cointegration method indicate further that there are no structural breaks or regime shifts in the cointegrating coefficients during the period 2009:Q1 to 2017:Q4. In conclusion, the existence of apositive relationship between real modern payment technologies transactions and real currency in the hands of the Nigerian public implies that the former are partly responsible for the growth of the latter, thereby indicating that modern payment technologies are effective in promoting financial inclusion by providing access to liquidity services. Based on this finding the study recommends that the adoption of modern payment technologies should be promoted in order to further extend liquidity services to financially excluded Nigerians.

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