Abstract:
Money supply in an economy is significantly affected by the money market indicators and,
by implication, the funds available to the real estate sector. This study examines the
relationship between money supply in the economy and some money market indicators with
respect to their impacts on finance for real estate development in Nigeria. Secondary data
were obtained from the Central Bank of Nigeria covering five-year study period (2006 to
2010). The Pearson product moment correlation and multivariate regression models were
adopted for data analysis. The study found that there is statistically significant relationship
between broad money supply (M2) and explanatory variables with P-values < 0.05 except
inter-bank call rate (0.7085), and prime lending rate (0.7554). Furthermore, the principal
component analysis revealed that interbank call rate, inflation, and monetary policy rates are
three components with eigenvalues >1.0; they account for 77.01% of variability in M2. Also,
stepwise regression of the variables showed that inflation, monetary policy rate, saving
deposit rate, and Treasury bill rate have statistically significant impact on broad money
supply in Nigeria. The implication is that money supply in the economy from where funds are
made available for real estate development is significantly affected by the indicators and
consequently the real estate sector by dwindling financial allocation to the real estate sector.
It was recommended that real estate investment trust may possibly be the best option to
financing the real estate sector of the Nigerian economy, while the Nigerian Institution of
Estate Surveyors and Valuers has great role in birthing the investment vehicle.
