Economic and Financial Review


Central Bank of Nigeria


Central Bank of Nigeria, Income Velocity, Money, Monetary Targeting, Nigeria


In this paper, the authors set out to empirically investigate the determinants of income velocity of money in Nigeria, using quarterly time series from 1985:1 to 2012:4. The paper confirms a positive and statistically significant relationship between the growth of income and the velocity of money, which supports the quantity theory of money. Interest rate also has a positive and significant relationship with the income velocity of money. The financial sector development variable adopted, growth rate of stock market capitalization, has a negative relationship with the income velocity of money. The variance decomposition and impulse response results identified inflation rate as the most significant variable to innovations in the income velocity. The results show that the monetary authority cannot obtain additional leverage by issuing more money without generating high inflationary pressure.

Author Bio

Peter Okafor is an Assistant Director; Tersoo Shitile is an Economist, Danladi Osude, Chris lhediwa, Olamide Owolabi and Verse Shorn are Assistant Economists, while Emmanuel Agbodaola is a Corp Member (NYSC) in the Monetary Policy Department of the Central Bank of Nigeria.

Publication Title

CBN Economic and Financial Review





Recommended Citation

Okafor, P. N., Shitile, T. S., Osude D., Ihediwa, C. C., Owolabi, O. H., Shom, V. C., Agbadaola, E. T. (2013). Determinants of Income Velocity of Money in Nigeria. CBN Economic and Financial Review. 51(1), 29-59.

Included in

Economics Commons



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.