Determinants of excess liquidity in the Nigerian banking system

Ujunwa Augustine, Okoyeuzu Chinwe, Wilfred I. Ukpere

Research output: Contribution to journalArticlepeer-review


This study examines the determinants of excess liquidity in the Nigerian banking system using generalized autoregressive conditional heteroscedasticity (GARCH) for the period January 2008 to December 2015. The identified determinants of banking system excess liquidity are capital importation, Federation Account Allocation Committee (FAAC) distribution, exchange rate premium and policy instruments such as cash reserve ratio, special lending facility rate, Treasury bill rate and interbank rate. The empirical result revealed that the identified determinants have significant effect on banking system excess liquidity in Nigeria. Based on the findings, the study recommends that Nigerian monetary authority could rethink liquidity management in terms of developing robust strategies for mopping up the excess liquidity from the identified sources, rather than concentrating liquidating management strategy on the banking system.

Original languageEnglish
Pages (from-to)516-526
Number of pages11
JournalJournal of Reviews on Global Economics
Issue numberSpecial Issue
Publication statusPublished - 2018
Externally publishedYes


  • Banking system
  • Excess liquidity
  • Monetary policy

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (all)


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