Journal of Banking and Financial Dynamics

Stock Market Liquidity and Capital Formation in Nigeria

Idanyingi Rogers-Banigo — 2025-05-15

This study empirically examined the effect of stock market liquidity on capital formation in Nigeria. An ex-post facto research design was adopted while secondary data, which ranged from 1985 to 2022, were used. These data were sourced from the Central Bank of Nigeria (CBN) Statistical Bulletins and the Nigerian Exchange Group (NGX) fact book. The study is based on the financial intermediation theory and the efficient market hypothesis. Descriptive analysis, regression analysis, and unit root tests were employed, as well as the Bounds Auto Regressive Distributed Lag (ARDL) testing approach for evaluation. Post-estimation tests were also conducted to check the validity and reliability of the model. The results conclude that there is a positive and significant relationship between market capitalization and gross fixed capital formation in Nigeria, a positive and significant relationship between the turnover ratio and gross fixed capital formation in Nigeria, a negative and significant relationship between the total value traded ratio and gross fixed capital formation in Nigeria, and a positive and significant relationship between the all-share index and gross fixed capital formation in Nigeria. The study recommends that a reliable regulatory framework should be put in place by the government that could actively carry out the surveillance of the stock market. The study further recommends that policies focusing on promoting long-term investments, aligning stock market activity with productive sectors, deepening financial instruments for infrastructure financing, and ensuring regulatory frameworks support stability and long-term growth be implemented.

Effect of Inflation on the Savings Mobilization Potential of Commercial Banks in Sierra Leone. A Case Study of the Rokel Commercial Bank

Idrissa Sannoh — 2025-05-20

The economy in Sierra Leone is characterized by a perpetual inflationary trend. Inflation is a critical concern for a stable financial system in business entities. As a result of inflation and the poor financial performance of business entities in Sierra Leone, the non-performing loan (NPL) indicator exceeds the tolerable limit, which negatively impacts the profitability of banks. The destructive consequences of inflation are untold. For instance, the financial liberalization theory agrees that inflation results in macroeconomic disability. The aim of the study is to help optimize the local savings mobilization capacity of commercial banks in Sierra Leone, enabling them to efficiently survive in light of the challenges presented by the inflation trend. A secondary research design was employed in the study using both quantitative and qualitative systematic reviews. To complement the secondary data, a rapid assessment study was carried out with customers and officials of the Sierra Leone Rokel Commercial Bank and the Bank of Sierra Leone regarding issues of their likely behavior in light of changing financial intermediation variables such as the deposit rate of interest (DRI), lending rate of interest (LRI), Treasury Bill Rate (TBR), and foreign exchange rate (FER). Records on the savings pattern of customers were used to determine the Total Deposit Output Rate (TDOR). The coverage period is from the 2018 to 2023 financial year. The study revealed that inflation adversely affects the local funds mobilization efforts of commercial banks in Sierra Leone. The behavior of bank customers and the profit maximization behavior of commercial banks stand out as the two main causes. The evidence gathered indicates that during inflationary periods, commercial banks focus their investment funds on the foreign exchange market, limiting funds available for local investment through higher lending rates and selective credit control instruments.

Determinants of Money Demand in Sierra Leone

Yusuf Pujeh — 2025-05-29

This study provides a comprehensive analysis of the determinants of money demand in Sierra Leone, focusing on macroeconomic factors such as income, interest rates, inflation, and exchange rates. Money demand is a crucial element in shaping monetary policy, influencing financial stability, and ensuring sustainable economic growth. The research integrates classical, Keynesian, and modern monetary theories to explore the multifaceted interactions that drive money demand in a developing economy like Sierra Leone. Utilizing secondary data spanning from 2010 to 2023, obtained from institutions such as the Bank of Sierra Leone, the World Bank, and the International Monetary Fund. The study employs econometric techniques which include the money demand models, correlation analysis, and unit root tests for stationality. The findings indicate that real GDP has a significant positive impact on money demand, while inflation and exchange rate depreciation negatively influence money holdings. Interest rates exhibit an insignificant effect, highlighting the weak monetary policy transmission mechanism in Sierra Leone. These findings offer critical policy recommendations for the Bank of Sierra Leone and other financial institutions, aiding in the formulation of strategies that foster economic growth and financial stability. The research further emphasizes that a thorough understanding of the determinants of money demand in Sierra Leone is essential for effective monetary policy implementation, macroeconomic stability, and long-term economic development.The policy recommendations derived from this research are expected to aid in designing an efficient and robust monetary policy framework, contributing to economic stability and growth in the country.