Effect of ATMs on Money Demand of UI Students

8/3/2019 Effect of ATMs on Money Demand of UI Students

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THE EFFECT OF AUTOMATED TELLER MACHINES ON

DEMAND FOR MONEY BEHAVIOUR OF STUDENTS OF

THE UNIVERSITY OF IBADAN, NIGERIA

BY

BODUNRIN OLALEKAN SAMUEL

MATRIC NO: 139170

BEING AN ORIGINAL ESSAY SUBMITTED IN PARTIAL

FULFILLMENT OF THE REQUIREMENT FOR THE

AWARD OF BACHELLOR OF SCIENCE(B.Sc.) DEGREE

IN ECONOMICS, UNIVERSITY OF IBADAN.

OCTOBER, 2011.


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CERTIFICATION

I certify that this study was carried out by BODUNRIN OLALEKAN SAMUEL,

Matriculation number 139170, Department of Economics, University of Ibadan, under

my supervision.

.................................. ..

Date Supervisor

DR. OMO AREGBEYEN

B.Ed. (Educ. Mgt./Econ.),

M.Sc.(Econ.), Ph.D.(Ibadan).

Department of Economics,

University of Ibadan,

Ibadan.


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DEDICATION

This research work is dedicated to the Glory of God and to my late loving maternal

Grand Mother; Mrs. Esther Olaitan, my late father, Mr. Bodunrin and my Mother; Mrs.

Modupe Bodunrin for the proper upbringing and love bestowed upon me.


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AKNOWLEDGEMENTS

I am grateful to God almighty for his immeasurable grace, favour, provision and

protection throughout my programme.

My profound gratitude goes to my parent and every member of my extended family,

particularly Mr. and Mrs. Ayannaike, Bros Niyi and wife, Engr. Peter Otunba and wife,

The Ososanyas, and all my younger ones for their unending love, understanding and

support. Thank you all.

I also acknowledge and appreciate the supports i received from the all members of Gods

family, particularly, Four square Gospel Church in Nigeria; Rev Akeju. Rev (Mrs.)

Oluwaleye, the Odubeles, the Akangbes, Pas. Gbenga Odeogberin, Bro idowu Ofi, Engr.

Wale Egbewole and pas. Christian Ernest, Arch Bishop Vining Anglican Church, Ikeja,

RCCG, MFMCFUI and the DLCFUI. Thanks for being there for me.

I cant but appreciate my supervisor, Dr. OMO AREGBEYEN for his careful corrections,

suggestions and constructive criticisms which made this work a reality.

More so, to all my lecturers who have taught me at one time or the other, the knowledge

you impacted on me helped in writing this project. You are highly appreciated.

In addition, i appreciate all my course mates both in my former department (Geography)

and in my present department; the department of Economics for their love from the first

day of contact till now, may the almighty God take you to a greater height in life and


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make you policy makers, problem solvers, movers and shakers of our nation, Nigeria and

the World in general. God bless you all.

Finally, to all my friends, particularly these two rare breeds; Ifeoluwa Akanni and

Olalekan Aduloju BSc., FNIM, Oracle DBA, HSM, thanks for your prayers and

unflinching supports.


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ABSTRACT

The automated teller machines should really have impacts on money demand, if it

does not, then its purpose have been defeated. The envisaged impacts will definitely be an

engine of growth in the financial sector and help the country move towards a cashless

society in the nearest future. This study explores the effect of automated teller machines

on money demand behaviour of students of the University of Ibadan, Nigeria. Two

hundred and twelve (212) campus resident students across the 9 halls of residence in the

main campus were randomly sampled, using the stratified random sampling. A structured

questionnaire was used to collect data. The analytical tool used was mainly descriptive

and inferential statistics; using tabular frequency, percentage distribution, correlation

and regression with the aid of the statistical package for social sciences (SPSS). About

95.8 percent of the sampled undergraduates operate a bank account, and about 89.6

percent of them have at least one ATM card. The empirical analysis indicates drastic

reduction in average cash holdings with the possession/use of ATM cards among sampled

students. The study therefore concluded that the possession /use of ATM cards have made

impacts on the money demand behaviour of the students of the University of Ibadan. The

study recommends that more ATMs should be installed on campus.


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TABLE OF CONTENTS

CONTENTS PAGES

Certification i

Dedication ii

Acknowledgement iii

Abstract v

Table of Contents vi

List of Tables viii

List of Figures ix

CHAPTER ONE: GENERAL INTRODUCTION

1.1 Statement of the Problem 1

1.2 Aims and Objectives 2

1.3 Justification of the Study 2

1.4 Scope and Limitation of the Study 3

1.5 Research Hypothesis 4

1.6 Plan of the Study 4

CHAPTER TWO: LITERATURE REVIEW

2.0 ATM; Concept, Issues and Evolution 5

2.1 The payment System and ATM 6

2.2 The Emergence of ATM and its technology 8

2.2.1 ATMs Technology 9

2.3 The role of Information technology on the banking Industry 9

2.4 Theory of Money Demand 11

2.5 ATM and Demand for Money; Empirical Studies 20

2.6 Evaluation of the Literature 25

CHAPTER THREE: RESEARCH METHODOLOGY

3.0 Introduction 27

3.1 Type of Data needed 27


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vii

3.2 Source of Data 27

3.3 Instrument of Data Collection 27

3.4 Population of Study 28

3.5 Sample/Sampling Techniques 28

3.5.1 The Stratified random Sampling 28

3.6 Application of the Sampling Techniques 30

3.7 Method of Data Analysis 32

3.7.1 Regression Analysis 32

3.7.2 The effect of ATMs on money demand 32

3.7.3 Correlation Analysis 33

CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION

4.0 Introduction 34

4.1 Descriptive Analysis 34

4.1.1 Respondents Banks Account Holding Profile 36

4.1.2 ATM and Cash Holding of the Respondents 42

4.2 Empirical Analysis 46

4.2.1.1 Correlation Analysis Results 46

4.2.1.2 Regression Analysis Results 48

4.2.1.2.1 Regression of Pre-ATM Average Cash Holdings on Monthly

Volume of Cash Transactions 48

4.2.1.2.2 Regression of Post-ATM Average Cash Holdings on Monthly

Volume of Cash Transactions 49

4.3 Testing the Hypothesis 51

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Summary of findings 53

5.2 Conclusion 55

5.3 Recommendations 56


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REFERENCES 58

RESEARCH QUESTIONNAIRE 62

LIST OF TABLES

Table 3.1 Population by Residence 30

Table 3.2 Halls of Residence Sample Allocation 31

Descriptive Analysis

Table 4.1 Respondents Profile 35

Table 4.1.1 Respondents Bank account holdings 36

Table 4.1.2 Distribution of Respondents holding

Account by Banks 37

Table 4.1.3 Distribution of respondents by mode of

account operated 38

Table 4.1.4 Distribution of respondents by Bank distance

from the Campus 38

Table 4.1.5 Distribution of respondents by ATM Card

ownership 39

Table 4.1.6 Bank in which respondents owns ATM Cards 40

Table 4.1.7 Distribution of respondents by year in which they obtained

their ATM Card(s) 40

Table 4.1.8 Convenience in the use of ATMs 41

Table 4.1.9 Functionality of ATMs around the Campus 41

Table 4.1.10 Distribution of respondents by the banks ATM they use. 42

Table 4.1.2.1 Monthly Volume of Cash Transaction 42

Table 4.1.2.2 Frequency of cash withdraws with ATM Card(s) 43

Table 4.1.2.3 ATM Card reduced my Cash Holding 43


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Table 4.1.2.4 Undecided, D&SD: I attribute this non-functionality

of ATMs around Bank 44

Table 4.1.2.5 I support CBN Directives of Banks operating ATMs

only in their branches 45

Table 4.1.2.6 Descriptive Statistics of Pre ATM 45

Table 4.1.2.7 Descriptive Statistics of Post ATM 46

Empirical Analysis

Correlation Analysis Results

Table 4.2.1.1.1 Correlations between Pre ATM Average cash holding

and Monthly Volume of Cash Transaction 47

Table 4.2.1.1.2 Correlations between Post ATM Average cash holding

and Monthly Volume of Cash Transaction 47

Regression Analysis Results

4.2.1.2.1 Regression of Pre-ATM Average Cash Holdings on Monthly Volume

of Cash Transactions

Table 4.2.1.2.1 Coefficient of Determination 48

Table 4.2.1.2.2 ANOVA Table 49

Table 4.2.1.2.3 Regression Coefficients 49

4.2.1.2.2 Regression of Post-ATM Average Cash Holdings on Monthly Volume

of Cash Transactions

Table 4.2.1.2.2 Coefficient of Determination 50

Table 4.2.1.2.3 ANOVA Table 50

Table 4.2.1.2.4 Regression Coefficients 51

LIST OF FIGURES

Figure 2.7.1 Transaction Motive Demand for money 14

Figure 2.7.2 Precautionary Demand for money 15

Figure 2.7.3 Speculative Demand for money 16

Figure 4.1.1 Banks used by Respondents 37


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CHAPTER ONE

Introduction

1.1 Statement of the Problem

The quantity theory of money as suggested by Irving Fisher in his influential

book; the Purchasing Power of Money, published in 1911 states that If people use

charge accounts and credit cards to conduct their transactions and [they will]

consequently use money less often when making purchases, [since] less money is

required to conduct the transactions generated by nominal income, velocity (the average

number of times per year that a Naira is spent in buying the total amount of goods and

services produced in the economy) will increase. The validity of this theory in Nigeria,

most especially, the university campuses has been a bone of contention, as most students

still hold large amount of physical cash despite the spread of ATM machines around

these campuses.

Of recent, in the premier University of Ibadan, there has been continuous siting of

ATMs by banks around the campus premises, some of which are owned by; Afribank

installed at UI gate, Fin bank at Agbowo, First bank at UI gate, Idia Hall and at the

faculty of Education, Intercontinental bank installed at the faculty of Law, Sky bank

located along Postgraduates School road, Sky bank installed at tantalizer, Stanbic IBTC

at the Social sciences and Union bank located opposite Niser park. With all these ATMs

around the campus premises, it is expected that the demand for real money balance by

student should be on the downward side to conform to the quantity theory of money.

There is therefore a paramount importance for there to be an intensive and

detailed research, and analyses on the effect of the ATM machine on demand for money

behavior of individuals, whether the spread of ATMs on campuses should be encouraged

or not, whether the directive given by Central Bank of Nigeria (CBN) to commercial

banks to curtail the spread of off-premise ATMs (according to CBN because of unhealthy

competitions especially in public places) and the recent move towards a cashless society


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in the year 2012 is necessary or not. In light of this, the study seeks to investigate the

demand for money among students given the increased installation of ATM machines in

every corner of the Campus.

1.2 Aims and Objectives

The broad Objective this research work is to analyze and show empirically the

effect of ATM on demand for money behaviour of selected students of the University of

Ibadan.

The specific objective include to;

a) Ascertain the diffusion of ATM cards among the Students;b) Characterize the demand for money pattern of students; andc) Evaluate the effect of the ATM cards/transactions on the demand for money

behaviour of the students.

1.3 Justification of the Study

The findings of this study will be deeply appreciated, since such study has never been

carried out in the University of Ibadan before. It will expose how the nearness to ATM

Machines can influence the demand for money behaviour of students; it is rational to

believe that students who are far from the location of automated teller machines will hold

high amounts of cash so as to reduce the frequency of withdrawals as well as the cost

associated with it.

This study will enable us ascertain the extent at which the proximity of students to

ATMs affect their money demand on average. Also, this study will provide a mechanism

for estimating the volume of money balances held by students every month; Students like

every other economic agents hold some amount as cash balance used for daily

transactions and expenses, these amounts are easily estimated and quantified making

inferences from the sample to be study to the total population.


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The importance of the volume of money balances held by students on economic

activities within the University of Ibadan community is also an essential findings that will

be appreciated in this research, this will enable us see the economic reasons for the

increasing establishment of several businesses within and around the campus, and its

impact on economic activities of these businesses during and after sessions. More so, the

findings of this study will aid the decisions of the school authority whether or not school

to allow other commercial banks that are interested in sitting their ATM within the

University of Ibadan and the implication of such actions on the welfare students and

economic activities on the campus.

Additionally, the services rendered by the Automated Teller Machines (ATM)

that are placed in strategic locations within the University of Ibadan are best appreciated

having had a detailed understanding of its impact on money demand of the students.

Finally, this study will serve as a catalyst for further researches.

1.4 Scope and limitation of the Study

The scope of this study is limited to full time undergraduate students of the

University of Ibadan who reside in the Halls of Residence in the main campus only. The

Halls of residence that will be used in this research work will be the Nine Undergraduate

Halls in the University of Ibadan namely; Independence Hall, Ransom Kuti Hall,

Mellanby Hall, Nnamdi Azikwe Hall, Obafemi Awolowo Hall, Queen Elizabeth Hall,

Queen Idia Hall, Sultan Bello Hall and Tedder Hall of Residence. This is due to

accessibility and to allow a wide coverage of the targeted population.

1.5 Research Hypothesis

The hypotheses to be tested in this research work will be as follows

Null hypothesis, 0H : ATMs has no significant effect on the demand for money

behaviour of U.I Students.


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Alternative Hypothesis, 1H: ATMs has significant effect on the demand for money

behaviour of U.I Students.

1.6 Plan of Study

This study consists of five (5) chapters. Chapter one (1) will be the introduction

and problem statement. This chapter one gives an insight into the information about the

topic of study and also information about the importance of carrying out such academic

work. The objectives of the study will be stated also, the scope of the study and the

statement of hypotheses that will be tested.

Moreover, the chapter two (2) will review the past literatures in related studies.

The theoretical framework of the study will be stated in this chapter. The chapter three(3) of this study will make up of the methodology adopted in data gathering for the

success of the study, here the sample size will be outlined and the intended mode of

analysis will be described.

Furthermore, chapter four (4) of this study will deal with the data presentation and

analysis. All data gathered from the field survey will be presented and analyzed. Finally,

chapter five (5) will summarize the findings, draw conclusion from the analysis in

chapter four and give the necessary recommendation.


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CHAPTER TWO

LITERATURE REVIEW

2.0 ATM; Concept, Issues and Evolution

The automated teller machine (ATM) can be defined according to the Longman

dictionary as a machine outside the bank that you can use to get money from your

account. ATMs are self-service banking machines which are linked directly to a

computer. They permit bank customers to withdraw money up to a certain amount.

Customers are also allowed to deposit money into their accounts. Deposits are often made

by placing the money in special container after the amount has been keyed into the

terminal by the customer. Withdrawals are performed by customer entering the amount of

money desired through a keyboard. The currency enclosed in clips can be dispensed to

the customer through the machine. Automated teller machine or the cash machine was

developed by Luther Simjian (1905-1997), a Turkish by origin in1939, when he came up

with the idea of creating a "hole-in-the-wall machine" that would allow customers to

make financial transactions. In 1939, Luther Simjian applied for 20 patents related to his

ATM invention and field tested his ATM machine in what is now Citicorp. After six

months, the bank reported that there was little demand for the new invention and

discontinued its use, laterJohn Shepherd-Barron's installed ATM at the Barclay bank in

Enfield town in north London, United Kingdom on the 27 June 1967. Since then, the use

of ATMs has grown enormously to replace the teller and Cheque payment system all over

the world. There is no contesting the fact that the introduction of ATM has changed the

face of electronic payment in Nigeria.

Automated Teller Machines (ATM) was introduced into the Nigerian market in

1989, as a matter of fact; the very first ATM in Nigeria was installed by National Cash

Registers (NCR) for the defunct Societe Generale Bank Nigeria (SGBN) in 1989. Banks

in the country are now adopting Self Service (ATMs) technology because it is cost

effective in the long run. In the past few years, Nigerian banks and the financial services

industry in particular, have embraced the concept of e-money. Changes are beginning to


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take place in the Nigerian financial landscape and customers are increasingly raising the

hope of expectations for quality customer services.

ATMs are placed not only in bank premises but also in locations such as shopping

malls, airports, campuses, restaurants and any large places where commercial activities

seems to be taking place. Consumers gain access to the use of ATMs through the ATMs

plastic card with a magnetic stripe, codes and owners names encrypt on it. The

encryption serves as user identification, where a four-digit authentication numbers

possess only by the owner is used for withdrawals of funds. The emergence of this

machine has given customers 24 hours everyday easy access to his or her cash deposit at

the bank thereby increasing his or her spending rate, consumption pattern and also

volume of transaction. It has also to some extent reduced exchange and transaction cost

greatly, since it can be used as a means of withdrawing fund and also as a means of

payment. ATMs can be used to perform so many transactions namely- Interbank Transfer

services like Cash withdrawal, Account Balance Inquiry, Airtime Recharge, Fund

Prepaid, Credit Transfer, Payment of Bills e.g. PHCN, MTN, DSTV, ZAIN,HITV etc.

and many more.

2.1 The Payment System and ATM

The teller payment system has denied the customers easy access to their money as

there must be compulsory eye to eye contact with the cashier before transactions can be

carried out, third party exclusion, increase cost incurred from printing of tellers, and also,

due to the obsessive ambition of most banking institutions to accumulation every form of

profits, they thereby finding it difficult to employ adequate number of cashiers to ensure

the efficiency of the teller payment system.

Cheque withdrawal system which would have been the most efficient payment

system, since it involves a third party still have the following shortcomings; It takes time

to get cheque from one place to another especially when the drawee is in a distant place.

It takes several business days before a customer that operate current account could be


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allowed to make use fund from a cheque deposited. Also, the paper and printing involve

in producing cheque make the payment system costly to the banks as such increasing its

expenditure, which is transfer to the customers. Finally, it has been established that

cheque payment system is very costly to the economy; e.g. in the United States, cheque

payment system cost about 10 billion dollars per year to process.

The ATM has proven to be the most efficient payment system, as the ATM has

decreased the need to wait in line and has helped many people perform their transactions

in a fraction of the time it once took, the cost of a single transaction performed at an

ATM is potentially less than the cost of a transaction conducted from a teller, as ATMs

are capable of handling more transactions per unit of time than are tellers (Laderman,

1990). Due to these and many more, the ATM is gradually replacing both the teller and

the cheque payment system.

Despite its many benefits, it has some shortcomings peculiar to Nigeria which are

as follows; Normal challenges facing other businesses in Nigeria like power outages,

telecoms breakdown and others do affect electronic payment platform like ATM services

in Nigeria. There are also staff training issues that are to be sorted out, training and re-

training of staff displaced by automation and customer/consumer education still lags

behind. With regard to Power, most ATM machine runs on generators, UPSes and

inverters to back up PHCN, in some extreme cases. It greatly influence consumers

consumption pattern in that they are forced to withdraw high amount of money since the

ATM restrict them to only high denomination currencies. The stability or strength of the

network connectivity in the country has not really improved to ensure efficient and

effective performance of the ATM. In addition, the recent increased ATM fraud has great

challenge on its uses as a secure means of payment. In conclusion, the introduction of the

ATM by the financial institutions is an attempt to reduce payment cost on the side of the

bank, increase their market share, but has greatly increase cost on the part of the

consumers.


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2.2 The Emergence of ATM and its technology

The influx of ATMs into the banking sector has brought with it other peripheral

technologies, which have also aided smooth electronic banking. Initially, banks in the

country have been installing withdrawing-enabled ATMs, these days most have started

moving toward the use of sophisticated ATMs used in the advanced countries. The

Nigerian banks, particularly commercial banks have started issuing out the smart cards

(microchip embedded cards) to their customers. Most of these newly issued ATM cards

are supported by international financial institutions like VISA, MasterCard, verve etc.

GTBank partners with MasterCard, UBA Group partners with VISA, while First Bank

partners with verve and other banks issue their own cards in partnership with other

international financial institutions. These new smart cards are multi-purpose debit cards

which give banks customers access to their accounts and can be used to buy goods and

services at Points of Sales (PoS) terminals and across other channels such as internet and

withdrawals of cash from ATMs. In addition, the cards are accepted worldwide as means

of payment for goods and services. The GTBank-MasterCard debit cards are accepted as

means of payments for goods and services at over 29.4 million MasterCard locations and

over 1.5 million ATMs in more than 210 countries. Most importantly, the new smart

cards are protected by the most secured technology for cards transactions (they are

microchip embedded cards).

2.2.1 ATMs Technology

ATM technically is a switched, connected-oriented networking technology that

provides dedicated, high- speed connections to virtually an unlimited number of users. It

operates on a cell-based fast-packet communication method that supports transfer rates

from 1.544Mbps to 10Gbps. Dedicated media connection running in parallel allow an

ATM switch to simultaneously support multiple conversation, eliminating the bandwidth

connection and data bottlenecks found on shared-media networks such as Ethernet,

Token Ring and FDDI. When Data is transferred in an ATM network, a switched virtual


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circuit (SVC) is established between the sender and the receiver. The information is

converted into fixed-length cell, which are transmitted through the network and

reassembled into data packets at the destination. ATM relies on the reliability of digital

lines to ensure data integrity and does not use error correction protocols. Numerous

transmissions can take place at once, enabling ATM to accommodate multiple dialogues

quickly, easily and reliably. ATMs dedicated bandwidth is capable of easily supporting

data-intensive application such as high-resolution computer graphics, large data-base

management systems and high-end engineering packages. The technologys high

throughput and real-time information delivery also make it a perfect solution for

emerging multimedia application combining data, voice and animation. ATM can be

installed into an existing network as needed without upgrading the entire LAN.

2.3 The Role of Information Technology in the Banking Industry

Information technology has penetrates and transform virtually every single

operation in the banking industry these days. Banks in the country are now adopting Self

Service technology like ATMs and several others because of their cost effectiveness in

the long run. In the past few years, Nigerian banks and the financial services industry in

particular, have embraced the concept of e-money in its entire operational departments;

although slowly since consumers and merchants change their payment habits more

slowly. Nevertheless the change towards this payment system is taking place; payment

patterns are changing worldwide as card-based payments are becoming a popular

alternative to using cash; although cash payments still remain the preferred option for

low-value expenses. Changes are beginning to take place in the Nigerian financial

landscape and customers are increasingly raising the hope of expectations for quality

customer services.

Technological innovations have greatly improved the banking services and by

extension the economy in general, setting the momentum for rapid economic

development. They offer convenience to customers and provide time saving banking


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services well beyond the traditional brick and mortar service period. They also ensure

that a lot of cash is still within the banking system where it can be managed and

channeled into productive use, instead of bulk withdrawals that we use to witness in the

past, facilitating the movement towards a cashless society as proposed by the Central

bank of Nigeria(CBN). It is good for customers to withdraw cash that they need by

eliminating the risk of loss through theft and fire. ATM card technology is enabling the

development of services in previously un-banked areas, helping to stimulate local

economies and encouraging investment and tourists' spending; in the past, most rural

areas has been classified as un-banked areas since banks found it unprofitable investing

in these areas due to their low banking habit, the extension of the ATM to these area

without physical presence of banks has further integrate the rural areas to the urban

populace and ensure movement of cash from the urban to the rural part of the country,

thereby, increasing local productivity and expanding tourism. ATM cards are an

important channel for banking in environments where the communication infrastructure

is deficient. Finally, once an infrastructure for ATM cards exists, both traditional and

non-traditional players will be able to contribute to developing the products to suite

previously un-banked clients. All in all it is has been win-win scenario for all the parties

concerned.

Finally, IT deployment has assumed such high levels that it is no longer possible

for banks to manage their IT implementations on a stand-alone basis with IT revolution,

banks are increasingly interconnecting their computer systems not only across branches

in a city but also to other geographic locations with high-speed network infrastructure,

and setting up local area and wide area networks and connecting them to the Internet. As

a result, information systems and networks are now exposed to a growing number. From

Rahman (2010)s work technology products are enumerated as follows: Internet banking,

Credit Card Online, Instant Alerts (through phone or e-mail), Mobile Banking, e-Monies

Electronic Fund Transfer, Online Payment of Excise & Service Tax, Phone Banking, Bill

Payment, Shopping, Ticket Booking, Railway Ticket Booking through SMS (mostly in


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the western world), Prepaid Mobile Recharge (through ATMs), Smart Money Order,

Card to Card Funds Transfer, Funds Transfer (E-Cheque), and Mobile Banking.

2.4 Theory of Money Demand

Several hypotheses have been developed to explain the demand for money; most

of these hypotheses provide explanation for the behavior of economic agents as regards

money demand pattern. They are known as theories of the demand for money. They are:

Quantity Theory of Money demand by classical Economists developed in 1911, the

Keynesian theories of the demand for money (1936) and the Milton Friedmans modern

quantity theory (1956) with its further development by William Baumol (1952) and

James Tobin (1956).

Quantity Theory of Money Demand

This theory was developed by the classical economists in the nineteenth by Irving

Fisher and later refined at the start of the twentieth century by Alfred Marshall, and A. C.

Pigou as the Cambridge version. The quantity theory of money is a theory of how the

nominal value of aggregate income is determined. Because it also tells us how much

money is held for a given amount of aggregate income, it is also a theory of the demand

for money. Irving Fisher, in his influential book The Purchasing Power ofMoney,

published in 1911, in a bid to examine the link between the total quantity of money M

(the money supply) and the total amount of spending on final goods and services

produced in the economy P Y, where P is the price level and Y is aggregate output

(income) came up with a concept that provides the link betweenMand P Y which he

called the velocity of money, the rate of turnover of money; that is, the average number

of times per year that a naira is spent in buying the total amount of goods and services

produced in the economy. Velocity Vis defined more precisely as


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V=

From this, the classical economist came up with quantity theory of demand for money,

which can be derived by making M the subject of the formulae.

=

When the money market is in equilibrium, the quantity of money M that people hold

equals the quantity of money demandedMd, so we can replaceMin the equation byMd.

Using kto represent the quantity 1/V(a constant, because Vis a constant), we can rewrite

the equation as:

Md =

Since k is a constant, the level of transactions generated by a fixed level of nominal

income PYdetermines the quantity of moneyMdthat people demand. Therefore, Fishers

quantity theory of money suggests that the demand for money is purely a function of

income, because the quantity theory of money tells us how much money is held for a

given amount of aggregate income, it is in fact a theory of the demand for money, which

believed that people hold money only to conduct transactions .The demand for money

according to this theory is determined by (1) by the level of transactions generated by the

level of nominal income PYand (2) by the institutions in the economy that affect the way

people conduct transactions and thus determine velocity and hence k.

The Cambridge Version of the Quantity theory of Money

This approach, also called the Cash balance approach is another variant of the

quantity theory. It originated from Alfred Marshall and A.C. Pigou who were based in

Cambridge University then. The theory demonstrated that money is capable of yielding

utility in and of itself. This theory then tries to examine the determinant of individuals

optimum money holdings and realized that any amount of money held in hand yield no

income. As a result, money will be held as long as the utility derived from holding it in

terms of both convenient and security outweighs the income loss by using the money to

purchase the good for consumption. So, according to the Cambridge school, money


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provides two needs for the individuals who have it. Firstly, money is held because of the

convenience it provides in transactions compared to other stores of value. It also provides

security because it reduces the possibility of inconvenience or at worse bankruptcy from

failure to meet unexpected obligations. From these, they were able to established that the

most important variables in the desire to hold money from the view point of an individual

are; the conveniences derived from holding the money for transaction purposes, the

individual wealth and the rate of interest.

Keynes Liquidity Preference Theory

This theory was developed by Maynard Keynes (1936) after he rejected the

classical view that velocity was a constant and developed a theory of money demand that

emphasized the importance of interest rates in his book The General Theory of

Employment, Interest, and Money. This theory of the demand for money, he called the

liquidity preference theory. The theory seeks to know why individuals hold money. He

postulated that there are three motives behind the demand for money: the transactions

motive, the precautionary motive, and the speculative motive.

Transaction Motive Demand for money

According to Keynes, individuals are assumed to hold money because it is a

medium of exchange that can be used to carry out everyday transactions, i.e. the

transactions demand for money arises from the lack of synchronization of receipts and

disbursements. He emphasized that this component of the demand for money is

determined primarily by the level of transactions people want to carry out. Because he

believed that the volume of these transactions was proportional to income, like the

classical economists, he took the transactions component of the demand for money to be

proportional to income. i.e. ( )YfM dt = ;

Where

d

tM represent transactions demand for money, and Y Income. This can be

depicted as;


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Figure 2.4.1

Income,Y( )YfM dt =

Real Money balance

Precautionary Demand for money

Keynes also recognizes that people hold money for precautionary purposes in

addition to the transaction motive. People hold money as a cushion against an unexpected

need, in other words, people hold money for unforeseen contingencies or circumstances,

i.e. to meet unexpected bills. It is believed by Keynes that the amount of precautionary

money balances people want to hold is determined primarily by the amount of

transactions that they expect to make in the future and that these transactions are directly

proportional to income. Therefore, he postulated, the demand for precautionary money

balances is proportional to income. i.e. ( )YfM dp =

Whered

pM represent precautionary demand for money. this relationship can be depicted

as;


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Figure 2.4.2

Income, Y ( )YfM dp =

Real Money balance

Speculative Demand for money

John Maynard Keynes went a step further in adding the speculative demand in his

analysis for the demand for money; he agree with classical Cambridge economist that

money is a store of wealth and called this reason for holding money the speculative

motive. Since wealth is tied closely to income, the speculative component of money

demand according to Keynes would be related to income. However, Keynes looked more

carefully at the factors that influence the decisions regarding how much money to hold as

a store of wealth, and found out that interest rate is the key factor under this motive.

Keynes divided the assets that can be used to store wealth into two categories: money and

bonds.

He also asked why individuals would decide to hold their wealth in the form of money

rather than bonds. Keynes assumed that the expected return on money was zero in his

time, unlike today. For bonds, there are two components of the expected return: the

interest payment and the expected rate of capital gains. As we know, when interest rates

rise, the price of a bond falls. If you expected interest rates to rise, you expect the price of


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the bond to fall and suffer negative capital gains. In this case, people would want to store

their wealth as money because its expected return is higher; its zero return exceeds the

negative return on the bond. Keynes assumed that individuals believe that interest rates

gravitate to some normal value, therefore according to Keynes, If interest rates are below

a certain normal value, people expect it to rise and bond prices to fall, they therefore

prefer to hold their wealth as money rather than bond, also if interest rates are above the

normal level people will expect it to fall and bond price to rise, since the return for

holding bond are expected to be high than that of money, bond will be prefer to money.

From these, it was established that speculative motive is negatively related to the level of

interest rates. i.e. ( )ifMdS = . This can be depicted as;

Figure 2.4.3

Interest rate, i( )ifMdS =

RealMoney balance

In putting the three motives for holding money balances together into a demand for

money equation, Keynes uses the demand for money balances given as

=

+ Yif

p

M,

.


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This shows that demand for real money balance is negatively related to interest

rate, while it is positively related to income.

Further Developments in the Keynesian Approach

Economists developed more precise theories to explain the three Keynesian

motives for holding money. A key focus of this research was to understanding better the

role of interest rates in the demand for money.

Transactions demand. William Baumol and James Tobin independently

developed similar demand for money models, which demonstrated that even money

balances held for transactions purposes are sensitive to the level of interest rates. They

considered a hypothetical individual who receives a payment once a period and spends it

over the course of this period in developing their models. In their models, money which

earns zero interest is held only because it can be used to carry out transactions. The

conclusion of the Baumol-Tobin analysis is as follows: as interest rates increase, the

amount of cash held for transaction purposes will decline, which in turn means that

velocity will increase as interest rates. The transactions component of the demand for

money is negatively related to the level of interest rates.

Precautionary demand. We know that there are lots of benefits of holding

precautionary money balances, but weighed against these benefit must be the opportunity

cost of the interest forgone by holding money. The more money an individual holds, the

less likely be or she is to incur the costs of illiquidity. But the more money the person

holds, the more interest he or she is giving up. As interest rates rise, the opportunity cost

of holding precautionary balances rises, and so the holdings of these money balances fall.

Therefore, the precautionary demand for money is negatively related interest rates.

Speculative demand. Tobin developed a model of the speculative demand for

money that attempted to avoid the shortcoming of Keyness analysis. His basic idea was

that not only do people care about the expected return on one asset versus another when

of the returns from each asset. Tobin assumed that most people are risk-averse, and the

return of money is zero. Bonds can have substantial fluctuations in price, and their returns


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can be quite risky and sometimes negative. When the expected returns on bonds exceed

returns on money, people might want to hold money as a store wealth because it has less

risk. Tobin analysis also shows that people can reduce the total amount of risk in a

portfolio by diversifying (by holding both bonds and money). His model suggests that

people will hold bonds and money simultaneously as stores of wealth. Tobin attempted to

improve on Keyness rationale for the speculative demand for money, but he was only

partly successful.

Modern Quantity theory of Money

This theory was developed by Milton Friedman (1956) in an article titled The

Quantity Theory of Money: A Restatement. The article seems to refer to the Irving

Fishers quantity theory but his analysis was more of Keynes. This theory states that the

demand for money is influenced by the same factors that influence the demand for any

asset. He then applied the theory of asset demand (that states that the demand for money

should be a function of the resources available to individuals to money and the expected

returns on other assets relative to the expected return on money). He identifies a number

of variables which affect the demand for money, which are;

Permanent income

Bonds

Equities

Physical Goods

Friedman formulated his demand for real money balances using the below equation;

=

+

m

e

membp

d

rrrrrYfP

M,,,

Where P

Md

represents demand for real money balances


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pY represents permanent income(the present discounted value of all expected future

income)

br represents expected return on bond

er represents expected return on equity

e represents expected inflation rate

mr represents expected return on money

While the signs underneath the equation indicate whether the demand for money is

Positively (+ve) related or negatively (-ve) related to the terms that are immediately

above them.

According to Friedman, ( )

mb rr is the expected return on bonds relative to

money, as this variable rises, relative expected return on money falls and the demand for

money falls.

Also the term ( )

me rr is the expected returns on equities relative to money, as this

variable rises, the relative expected returns on money falls and the demand for money

falls.

In addition, Friedman added that the variable ( )

m

er is the expected return on goods

relative to money. As this variable rises, the expected return on goods rises and the

demand for money falls. Friedman went further to examine what influences the expected

return on money, mr that appears in all the three terms, which he found to be the

following two factors:

1. The services provided by banks on deposits included in the money supply, such as

provision of receipts in the form of canceled checks or the automatic paying of bills.

When these services are increased, the expected return from holding money rises.


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2. The interest payments on money balances. NOW accounts and other deposits that are

included in the money supply currently pay interest. As these interest payments rise, the

expected return on money rises.

Having examine these theories of demand for money, it should be worthy of note that

interest rates, expected return on bond and expected return on equity will not be used to

analyze student demand for money. Since student demand for money are mostly for

transaction and precautionary purposes, Keynes liquidity preference theory will be used

in this study with the exclusion of speculative demand for money.

2.5 ATM and Demand for Money: Empirical Studies

Only few empirical studies have been done on this subject in the past. Although

not all relates to students directly, yet inference can still be drawn on their applicability to

the student environment. However, the relatively few studies in the current literature that

are available on this subject yielded a results which are largely based on empirical

analyses of macroeconomic time series, indicate a negative effect of card payments on

the demand for cash, whereas the results relating to the effect of ATM transactions are

less conclusive. In contrast, microeconomic studies point to a significantly negative

impact of ATM transactions on the demand for cash. For the most part, however, these

studies are based on relatively old data (Avery et al., 1986 for the U.S.A.; Boeschoten,

1992, for the Netherlands) and do not quantify the strength of the effect (Attanasio, et al.,

2002 for Italy use data until 1995).

Helmut (2005) studied the impact of ATM transactions and cashless payment on

cash demand in Austria. In order to assess this effect of ATMs on money demand; the

demand for cash was determined by the frequency of withdrawals and by the amount

withdrawn. He found out that 94 percent of debit card holders use ATMs to draw cash,

while only some 58% of Austrians regularly draw cash at bank counters. Moreover, 14%

of respondents regularly acquire cash from other sources. A detailed analysis of the total

amount withdrawn indicates that about 53% of total cash withdrawn comes from ATMs


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and 37% from banks whereas the percentage shares of other sources of cash acquisition is

around 10%. This increase in the use of ATMs shows that both banks and their customers

are moving aggressively towards the total adoption of the e-payments system. The

average cash holding is then computed to be half the typical withdrawal amount plus

minimum balances, the undershooting of which triggers a further cash withdrawal, which

follow the view that if individuals have several cash sources, the average cash holding

was calculated to be half the sum of typical withdrawal amounts (Boeschoten, 1992).

Average cash holdings are then regressed on the monthly volume of cash transactions,

according to Helmut (2005) to examine ATMs Users cash holdings as it is been affected

by the volume of transactions .The results show that, at the same transaction value, ATM

users hold considerably less cash. The point estimates derived from the survey also

indicate that individuals who draw cash exclusively from ATMs have cash holdings that

are on average around 42% lower than those of individuals who draw cash exclusively at

banks. This signifies that ATM use has a quantitatively significant impact on the demand

for cash.

Marshall and Heslop (1988) reviewed in Olatokun & Igbinedion (2009) studied a

Canadian population, and found out ATM users to be young people with at least average

incomes and some high school education especially those in higher institutions. They

specifically found that respondents under the age of 35 were considerably more likely to

use computerized banking, ATMs, and debit cards than older consumers, while

consumers use of direct deposit increased with age. In these studies, the implications of

the use of ATMs on cash holdings were not explicitly examined in details, rather most of

them only focus on the demography features or status of users and the diffusion of ATMs

in the targeted population. Rugimbanas (1995) also did a profile study of users and non-

users of ATMs in terms of demographic and perceptual variables. His study discriminate

users from non-users, using the demographic variables of respondents and their

perceptions of ATM attributes in order to assess the relative importance of these predictor

variables on the use of ATMs. It was discovered from this study that perceptual variables


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were far more successful as predictors of ATM service usage than respondent

demographic variables.

Rogers et al. (1996) stressed that even bank customers that are literate and

extremely good in operating ATMs still find it difficult at times due to the maze of

options available on an Automatic teller Machine. Most of them keep trying until they

find solutions, but the elderly that face similar challenges is likely to quit than waiting to

find solution, also the use of try by error in learning how to operate ATMs may lead to a

longer queue that lead to the introduction of ATMs in the first place. Banks may be

losing the elderly as ATM customers. Roger et al suggest education and machine

redesign as a means of alleviating the ATM problems faced by the elderly. Most systems

designers and bank officials assumed that ATM was easy to use and required no training,

but it has been found out that all users irrespective of their age had problems using ATMs

initially when no training and guidelines are provided, and that older adults have

problems even after training. They indicated that banks could find better ways of teaching

people how to use ATMs. In the survey, 13 banks were questioned randomly and only

two were able to provide brochures that showed the user how to operate the ATM, and

these brochures were perfunctory at best. In their study, non-users of ATMs did not even

attempt to use the machines at all as they did not see a need for the service, probably

explained by their lack of knowledge about how the system worked and their discomfort

in having to learn it while others waited. Many of the respondents were not aware of the

different options offered on ATM and were more predisposed to use it if they were

provided training. Non-users and users stressed concerns about safety in using ATMs.

Hone et al. (1998) in his study discovered that despite of the success, diffusion

and widespread use of ATMs, a significant proportion of bank customers could not or

would not use them, or experience difficulties in their interactions. Literacy was found to

be a prerequisite to the use of ATMs. He therefore suggested that speech technology

should be employed to accommodate the teeming numbers of non-users to the use ATMs,

while at the same time, improving usability for all. This is likely to have positive


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externalities, as it will include hands-free and eyes-free use for physically- and visually

impaired users, and improved ease and speed of use through increased naturalness of the

interaction. Hone et al. (1998) then went ahead to investigated user attitudes to the

concepts of a speech-based ATM, via large-scale survey and a series of focus groups. He

later detected that the idea of using speech for ATM transactions raise the question of

privacy and security. Although visually impaired users were more likely to want speech

technology, but the challenge this will pose on privacy and security boils down to the fact

that enhancements to ATM will not necessarily suit all types of users.

Di Angeli et al. (2002) examined technology adoption in different cultural

contexts, analyzing the relationship between Hoffstedes cultural value dimensions and

ATMs adoption in urban India. They proposed that the underlying inhibitors to ATM

adoption in India were not intrinsically different from those determined earlier in Europe

and North and South America. These inhibitors could be traced back to a few main

factors, such as feelings of inadequacy, preference for human contact, lack of need and

safety concerns. They believed that those who used ATM did so because they had a need

for it, perceived it was easy to use, felt safe using it, and had positive attitude towards

technology in general. These reasons appeared to be caused by different factors

indifferent contexts due to different cultural values. For India, Di Angeli et al. (2002)

stated that the feeling of inadequacy was the result of a strong value dimension expecting

different access to resources as a function of peoples social status. The long-term

orientation of Indians explained why they did not mind queuing to access basic financial

services. Lee and Lee (2000) investigated the diffusion of various electronic banking

technologies, such as ATMs, debit cards, smart cards, direct deposit, and direct payment,

along with the characteristics of adopters and non-adopters based on the DOI theory.

They used the 1995 Survey of Consumer Finances and discovered that more educated,

affluent and younger consumers who were likely to communicate with professional

information providers tended to adopt electronic banking technologies more readily than


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their counterparts. Despite this, the specific factors that described adopters and non-

adopters varied across different types of banking technologies.

Olatokun and Igbinedion (2009) looked at the application of the theory of

diffusion (DOI) to the adoption of ATMs in Nigeria. The study was carried out in Jos

where 14 banks and 600 respondents were administered questionnaires. The demographic

characteristics of the respondents reveal that most of them were students and youths. The

theory of diffusion (DOI) postulates that five attributes of innovation influences its

adoption (Rogers, 1995). These attributes had been used to examine the adoption of

variety of communication and Information technology e.g. intranet Use (Horton et al,

2001), Internet Banking (Gerrard and Cunningham, 2003; Kolodinsky et al, 2004; Tan

and Teo, 2000) etc. These attributes as used by Olatokun and Igbinedion (2009) are:

Relative Advantage: This expresses to what degree the new product is better than the

one it replaces, which could be judged not only by profit, but by factors such as the ease

of use and storage etc.

Compatibility: This relates to how the production of the innovation and the innovation

itself takes into account the local values and customs of the adopters. It is the point at

which an innovation fits into the specific society. The smoother the innovation fits into

the culture, the faster the rate of adoption.

Complexity: This is the extent of how complex it is for an adopter to understand and use

an innovation. Logically, the harder an innovation is to use, or perceived to use, the less

likely that an adopter would be able to consume it.

Trialability: This is the capacity of the consumer to give the innovation a try or test

before deciding to adopt it or not. This enables the rate of adoption to increase after a

successful trial.

Observability: This property is the idea that when an innovation benefit does not

instantly solve a consumers problem or need, it will not diffuse through a society as

quickly compared to an innovation that is more of a solution to a problem. It is also the

degree to which the results of an innovation=\n are visible to others. What is observed is


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what can be communicated, and this could affect diffusion depending on the outcome of

what has been observed.

The individual effects of these constructs were examined on Attitude, before the effect of

attitude on the adopters intention to use was examined. The study according to Olatokun

and Igbinedion (2009) showed that attitudinal dispositions significantly influence use of

ATM. All the five attitudinal constructs have strong influences on adoption and intention

to use ATM. it was also concluded that the respondents believed that the information

concerning their use of ATMs was secure, and their using ATM was safe.

This supported Sheths (1981) proposition that lowered perceived risk increases the

likelihood of consumer adoption, Chang et al. (2001) that the use of ATMs appeared to

be convenient compared with using the teller in the banking hall and Rogers (1995) that

the harder an innovation is to use, or perceived to use, the less adopted by banks.

2.6 Evaluation of the Literature

Most of the literatures did not look directly into the cash holding reduction effect

of ATMs given any transaction volume. They were mostly concerned about the adoption,

diffusion and acceptability of ATMs Technology among different study groups. The

demographic characteristics of the users and non-users as well as the attitudinal response

of most users to the attributes of the technology also served as Centre of focus of these

literatures.

According to Helmut (2005), it could be inferred that ATM transactions and

cashless payments affect optimal cash holdings in two ways.

First, ATM transactions are likely to reduce the time-cost per withdrawal. In this event,

consumers would withdraw cash more frequently and so hold smaller amounts of cash on

average as discovered in Helmut Stix (2005). However, it could also be that bank counter

withdrawals are merely substituted by ATM transactions and that all things considered

the number of withdrawals does not rise. This study will therefore examine the question


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of whether and to what extent ATM use affects withdrawal frequencies and hence the

demand for cash

Second, card payments permit direct access to the payers account, which means that

only part of total transactions is affected in cash. This decline in cash transactions has a

proportional effect on optimal cash holdings (Markose and Loke, 2003). If the study

groups are more inclined to online transactions, this will definitely have a reduced effect

on cash transactions and by extension cash holdings. So reduced cash holding could mean

that most of the transactions are done online or that withdrawals frequency is very high

due to the use of ATMs.


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CHAPTER THREE

Research Methodology

3.0 Introduction

The methodology to be employed in this research work will involve the use of

primary data that will be collected using stratified random sampling with the aids of

questionnaires, and analyzed using the Regression Analysis, correlation analysis,

Hypothesis testing with several table and charts. Also the Statistical package for social

sciences (SPSS) as an electronic econometric package will be adopted for this research

analyses. Below are the reviews of the tools

3.1 Type of Data needed

The data needed for this research is obviously primary data- which are first hand

data collected directly from the respondents or the targeted group with the aid of the

questionnaire. Primary data will be used since the needed information does not exist in

the form of secondary data anywhere and if available may not be reliable.

3.2 Source of Data

Since the needed data to be use is primary data, it will be collected directly from

the targeted group i.e. the students of the University of Ibadan using questionnaire

method of data collection.

3.3 Instrument of Data collection

The method to employ in collecting the needed primary data is the questionnaire;

which is a document or form which contain questions designed to collect relevant

statistical or socio-economic information from the respondents for the purpose of

research or enquiry.


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3.4 POPULATION of the Study

The population to be studied is the full time undergraduate students of the

University of Ibadan that resides in the halls of residence irrespective of their level of

study. The total number of these students is 14,688, i.e. excluding the part-time students,

the post-graduates students and those that reside outside the campus or in the boys-

quarters around the campus environment.

3.5 SAMPLE/Sampling Techniques

Due to cost and time constraint as well as to achieve a higher level of precision,

212 questionnaires will be distributed randomly. The sampling design to be used is in this

study is the stratified random sampling due to the nature of the population.

3.5.1 The stratified random sampling

The stratified random sampling can be defined as a sampling design in which the

population is first stratified (divided) into homogenous groups and samples are drawn

from each group using the simple random sampling techniques. Each group is known as

stratum. Stratified sampling is suitable for heterogeneous population.

Stratification means that before any selection takes place, the population is

divided into a number of strata, and then a random sample is drawn from each stratum.

The stratification factor could be sex, age, state, income group etc. For this research work

the stratification factor will be the Residential Halls of residence.

Stratification ensure that each type of a population member is included in the in

the sample and hence yields a higher precision.

In stratification, for theth

i stratum,

Population size = N


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Sample Size = n

Sampling fraction =N

n

In this sampling method, a probability proportion to size (PPS) of certain percentage

(depending on population size) of each strata is designed, which is then use to derive the

sample size, n.

Having considered this sampling design critically, in terms of the techniques,

advantages and disadvantages, I have gone further to accumulate some basic knowledge

about the targeted population (University of Ibadan students-Undergraduates only).

Below are my findings:

The numbers of stratums i.e. Halls of Residence are nine in numbers. The total number of undergraduates (targeted population) in the University of

Ibadan main campus is 14110.

There is variability in the numbers of undergraduates that resides in this Hall ofresidents, so this sampling method will be suitable for this study.


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3.6 Application of the Sampling Techniques

The population is already stratified i.e. it has been divided into strata using the Halls

of residence as the stratified factor.

Table 3.1 Population by Residence

S/n Hall Total number of students

1 Independence 1,663

2 Kuti 1,145

3 Mellanby 1,109

4 Nnamdi Azikwe 1,659

5 Obafemi Awolowo 1,410(undergraduates only)

6 Queen Elizabeth 2,123

7 Queen Idia 2,872

8 Sultan bello 1,041

9 Tedder 1,088

Totals 14,100

Source: the student union transition committee (SUTC).

Since the population has already been stratified (divided) into different

homogeneous Halls of residence, a probability proportion to size (PPS) of 1.5% of the

students in each halls will be selected in order to ensure high level of precision in this

research. That is;


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1.5% of N = n. So that sampling fraction, 015.0=N

n;

e.g. 25663,1

100

5.1= .

Table 3.2 Halls of Residence Sample Allocation

Survey July, 2011

From the above design, it was discovered that 212 questionnaires will be needed for this

research work. i.e. the total number of respondents that will be selected randomly is 212

undergraduate students.

S/N HALL Total Number Of Students

(N) Sample selected(n)

1 INDEPENDENCE 1,663 25

2 KUTI 1,145 17

3 MELLANBY 1,109 17

4 NNAMDI AZIKWE 1,659 25

5 OBAFEMI AWOLOWO 1,410(Undergraduates only) 21

6 QUEEN ELIZABETH 2,123 32

7 QUEEN IDIA 2,872 43

8 SULTAN BELLO 1,041 16

9 TEDDER 1,088 16

TOTALS 14,100 212


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3.7 Method of Data analysis

The method suitable for the analysis of data of this nature is the regression analysis, the

correlation analysis as well as testing of hypothesis. For the sake of accuracy the

statistical package for social sciences (SPSS) will be employed in the analysis of the data

collected.

3.7.1 Regression Analysis

Regression analysis is the study of the nature or extent of association between two or

more variables on the basis of the relationship between them with a view to predict the

value of one variable from the other. This tool will be used the aid of the ordinary least

square (OLS) method of the multiple regression.

3.7.2 The effect of ATMs on money demand.

MVCTACH 10 +=

Where;

ACH: Average Cash Holding

0 is the intercept

MVCT: Monthly volume of cash transactions.

This can be estimated using these formulas;

XY 10 =

;

( )

=221

XXn

XYXYn

i

iiii


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Where Y is the Average cash holding (ACH); and

X is the monthly Volume of cash transaction (MVCT)

3.7.3 Correlation Analysis

Correlation measures the degree of linear association between two or more variables, i.e.

is a magnitude that shows degree of linear association between two or more variables.

The below formula will be used to test the degree of linear association.

( )[ ] ( )[ ]

=

2222

iii

iiii

YiYnXXn

XYXYnr

Where; the equations above show the degree of linear association between the

dependent variable and one independent variable.

Correlation coefficient (r) ranges from -1 to +1;

r = +1, implies perfect positive linear association between the two variables.

r = -1, implies perfect negative linear association between the two variables.

-1 < r


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CHAPTER FOUR

Data analysis and Presentation

4.0 Introduction

The results of the study are as shown in the following table and figures using the

descriptive as well as the inferential method of statistical analysis with the information

extracted from the questionnaire administered for the study.

4.1 Descriptive Analysis

Ninety two (92) of the respondents were female, this represent 43.4% of the total

respondents. While One hundred and twenty (120) of the respondents are male, this

represents 56.6% of the total respondents.

The respondents that fall under age 21-25 have the overall highest number of one

hundred and twenty (120) , while those between 21-25 have the second highest number

of fifty (50), followed by respondents within age 26 and above being 40 in numbers with

56.6%, 24.5 and 18.9% respectively.

Twenty- three (23) of the respondents were 100 level students, which represent

10.8 percent of the total respondents, while thirty-one (31) were 200 level students

representing 14.6 percent, thirty-six were 300 level students representing 36 percent, 400level were 110 in number representing 110 percent and 12 of the respondents were 500

level students representing 5.7 percent of the total respondents.

This study sampling techniques was based on stratified random sampling, where the halls

of residence of the respondents were used as the strata. The twenty-five (25) respondents

selected from Independence hall represent 11.8 percent, Kuti hall respondents represent

8.0 percent, and Mellanby hall respondents represent 8.0 percent also, Nnamdi Azikwe

hall respondents represent 11.8 percent, Obafemi Awolowo Hall respondents represent

9.9 percent, while Queens hall respondents represent 15.1 percent, Queen Idia hall


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respondents represent 20.3 percent, while Sultan Bello hall and Tedder hall respondents

both represent 7.5 percent individually.

Table 4.1 Respondents Profile

s/n All Demography Characteristics Frequency Percent1 Gender Male 120 56.6

Female 92 43.4

Total 212 100

2 Age 16 to 20 52 24.5

21 to 25 120 56.6

26 Above 40 18.9

Total 212 100

3 Level of Study 100 23 10.8

200 31 14.6

300 36 17.0

400 110 51.9

500 12 5.7

Total 212 100

4 Hall of Residence Independence Hall 25 11.8

Kuti Hall 17 8.0

Mellanby Hall 17 8.0

Nnamdi Azikwe Hall 25 11.8

Obafemi Awolowo Hall 21 9.9Queens Elizabeth Hall 32 15.1

Queen Idia Hall 43 20.3

Sultan Bello Hall 16 7.5

Tedder Hall 16 7.5

Total 212 100Field Survey, July 2011


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4.1.1 Respondents Banks Account Holding Profile

Of the two hundred and twelve (212) respondents, two hundred and three (203) operate

bank account, these represent 95.8 percent while only nine (9) respondents own no bank

account, and these represent just 4.2 percent.

Table 4.1.1 Respondents Bank account holding

Frequency Percent

No 9 4.2

Yes 203 95.8

Total 212 100.0

Field Survey, July 2011

Table 4.1.2 shows the classification of the respondents that have bank accounts

according the banks they used which was also represented by the pie-chart above. It

reveals that 23.1 percent uses Guarantee trust bank (GTB), which represent the highest

patronized bank on the campus, 11.3 percent uses First bank of Nigeria (FBN), while 6.1

percent uses United Bank for Africa (UBA) and another 6.1 percent of respondents that

have bank account uses Intercontinental Bank, 5.2 percent uses Oceanic Bank, also 4.2

percent, 0.9 percent and 0.5 percent uses Sky Bank, First City Monumental Bank(FCMB) and First inland Bank (Fin bank) respectively. The other banks had 6.6 percent

while 31.6 percent of these respondents that have banks account uses more one bank in

no particular order.


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Table 4.1.2 Distribution of Respondents holding Account by Banks

Frequency Percent

GTB 49 23.1

First Bank 24 11.3

FCMB 2 .9

OCEANIC Bank 11 5.2

SKY Bank 9 4.2

UBA 13 6.1

FIN Bank 1 .5

Intercontinental Bank 13 6.1

Others 14 6.6

More than One 67 31.6

No Response 9 4.2

Total 212 100.0


Figure 4.1.1


GTB 23.1%

First Bank 11.3%

FCMB 0.9%

Oceanic Bank 5.2%

Sky Bank. 4.2%

UBA 6.1%

Finbank 0.5%

Intercontinental

6.1%

Others 6.6%

More than one Bank

31.6%

Banks used by Respondents


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190 respondents out of the 212 respondents have savings bank accounts, this

represents 89.6 percent, while only 4 of them uses current accounts, representing 1.9

percent of the respondents. In addition, 9 respondents, representing 4.2 percent of

respondents uses both savings and current account, while another 9 respondents

representing 4.2 were those that have no bank accounts at all.

Table 4.1.3 Distribution of respondents by mode of account operated

Frequency Percent

Savings Account 190 89.6

Currents Account 4 1.9

Both 9 4.2

No Response 9 4.2

Total 212 100.0


Table 4.1.4 shows that 50 percent of the respondents, which represents 106

respondents, indicate that their banks are not far from the campus, while 97 respondents

representing 45.8 percent indicate that their banks are far from the campus.

Table 4.1.4 Distribution of respondents by Bank distance from theCampus

Frequency Percent

No 106 50.0

Yes 97 45.8

No Response 9 4.2

Total 212 100.0



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To ascertain the diffusion of ATM cards among the Students, the respondents were

asked if they have an ATM Card(s), 89.6 percent of the respondents indicate the

possession of an ATM Card(s), this represents 93.6 percent of those that have bank

accounts and 190 respondents out of the 203 respondents that bank and the total 212

respondents, 22 of the respondents, which includes those that have no bank accounts, do

not have ATM Cards. This means that 13 respondents have bank accounts but do not use

ATM Card(s) for some personal reasons that range from safety to nearness of their banks

and see no reason for the acquiring of the ATM card(s).

Table 4.1.5 Distribution of respondents by ATM Card ownership

Frequency PercentNo 22 10.4

Yes 190 89.6

Total 212 100.0


The ATMs Users were also classified based on the bank(s) that issued the ATMs,

and it was discovered that respondents that uses The Guarantee Trust Bank (GTB) ATM

Card(s) were the highest representing about 32.1 percent of all the respondents that uses

ATM cards and 28.8 of the total respondents, while about 20.3 percent of these

respondents uses more than one ATMs from different banks, respondents that uses First

Bank ATMs were about 12.1 percent of all those that use ATMs and 10.8 percent of total

respondents. The third highest on the list were both intercontinental Banks and United

Bank for Africa (UBA) with both having about 6.1 percent individually, while

respondent that uses the following banks ATMs; FCMB, Oceanic, Sky and Fin bank

were about 1.9 percent, 5.7 percent, 4.2 percent and 0.5 percent of total respondents

respectively.


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Table 4.1.6 Bank in which respondents owns ATM Cards

Frequency Percent

GTB 61 28.8

First Bank 23 10.8

FCMB 4 1.9

Oceanic Bank 12 5.7

SKY Bank 9 4.2

UBA 13 6.1

FIN Bank 1 .5

Intercontinental Bank 13 6.1

Others 11 5.2

More Than One 43 20.3

No Response 22 10.4

Total 212 100.0


Most of the respondents that uses ATM Card(s) obtained their ATM Card(s) in

the year 2008 and year 2009, while only about 7.5percent, 10.4 percent, 12.7 percent and

9.9 percent of these respondents obtained their ATM Cards in the year before 2006, year

2006, year 2007 and year 2011 respectively.

Table 4.1.7 Distribution of respondents by year in which they obtained

their ATM Card(s)

Frequency Percent

Valid Before 2006 16 7.5

Year 2006 22 10.4

Year 2007 27 12.7

Year 2008 49 23.1

Year 2009 55 25.9

Year 2010 21 9.9

No Response 22 10.4

Total 212 100.0



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The respondents were interviewed on the conveniences with the use of ATMs,

about 50.5 percent of those that uses ATMs, representing 45.3 of the total respondents

agree that the use of ATMs is very convenient, about 46.3 percent these respondents that

uses ATMs, representing41.5 percent of the total respondents, indicate that the use of

ATMs is moderately convenient, while only about 3.2 percent, representing 2.8 percent

of the total respondents, indicate that the use of ATMs is not convenient.

Table 4.1.8 Convenience in the use of ATMs

Frequency Percent

Very Convenient 96 45.3

Moderately Convenient 88 41.5

Not Convenient 6 2.8

No Response 22 10.4

Total 212 100.0


About 71.1 percent of the respondents that uses ATMs, representing 63.7 of the

total respondents, attested to the fact that the ATMs around the university of Ibadan only

functions sometimes, while 9.. percent of the respondents accept that these ATMs

function always and 16.0 percent disagree that these ATMs never function

Table 4.1.9 Functionality of ATMs around the Campus

Frequency Percent

Always Functional 21 9.9

Sometimes Functional 135 63.7

Never Functional 34 16.0

No Response 22 10.4

Total 212 100.0



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About 52.6 percent of the respondents that use ATMs, representing 47.2 percent

of the total repondents withdraws only from their Bank ATMs, about 23.1 withdraws

from other banks ATMs while about 19.3 percent of these respondents withdraws from

both their bank ATMs and other banks ATMs.

Table 4.1.10 Distribution of respondents by the banks ATM they use.

Frequency Percent

Your Bank's ATM 100 47.2

Other Bank's ATM 49 23.1

Both 41 19.3

No Response 22 10.4

Total 212 100.0


4.1.2ATM and Cash Holding of the Respondents

The average monthly volume of cash transaction of the 212 respondents selected

randomly within strata is about N9, 452:83, with range that lying between N2, 000:00

and 40,000:00 and standard deviation of about 5696.523.

Table 4.1.2.1 Monthly Volume of Cash Transaction

N Minimum Maximum Mean Std. Deviation

Monthly Volume of CashTransaction 212 2000.00 40000.00 9452.8302 5696.52272

N 212


The effect of ATMs on the demand for money can be examined to some extent

from the reduction of withdrawal frequency with the possession of the ATM Card(s).

From table 4.1.2.2, it shows that out of the 190 respondents that possesses an ATM


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Cards, 72 respondents representing 37.9 percent withdraws once a week, 60 respondents,

representing about 31.6 percent withdraws every two weeks, while 14.7 percent

withdraws once a month and the remaining 15.8 percent withdraws several times a week.

Table 4.1.2.2 Frequency of cash withdraws with ATM Card(s)

Frequency Percent

Several times a week 30 14.2

Once a week 72 34.0

Every two weeks 60 28.3

Once a month 28 13.2

No Response 22 10.4

Total 212 100.0


From table 4.1.2.3, when the respondents were asked if ATMs Card has reduced

their cash holding, both the respondents that strongly agreed (34.4 percent) and those that

agree (36.3 percent) that the use ATM Card(s) has reduced their cash holding were about

70.7 percent of the total respondents. 13.2 percent were indifferent, while only 5.2

percent and 0.5 percent disagree and strongly disagree respectively

Table 4.1.2.3 ATM Card reduced my Cash Holding

Frequency Percent

Strongly Agree 73 34.4

Agree 77 36.3

Undecided 28 13.2

Disagree 11 5.2

Strongly Disagree 1 .5

No Response 22 10.4

Total 212 100.0



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The 40 respondents that were undecided, disagree and strongly disagree when all

the ATM-using respondents were asked if ATM Card has reduced their cash Holding,

were also asked if their response was due to the non-functionality of the ATMs within

and around the banks, from table 4.1.2.4; 55 percent, representing 10.4 percent of the

respondents said NO attributing their reasons to some other personal factors. The

remaining 45 percent, representing 8.5 of the total respondents attributed their responses

to the non-functionality of the ATMs within and around the banks.

Table 4.1.2.4: Undecided, D&SD: I attribute this non-functionality of ATMs around

Bank

Frequency Percent

NO 22 10.4

Yes 18 8.5

No Response 172 81.1

Total 212 100.0


More so, the views of the respondents were sampled on the central bank of

Nigeria directives that banks that have off-premise ATMs should uninstall them, from

table 4.1.2.5; 34.4 percent of the respondents strongly disagree, 30.2 percent disagree,

13.2 percent were undecided, 9.9 percent strongly agree and 8.5 agreed. Majority of the

view were against the directives, anchoring their reasons on the need to bring banks

closer to the people, conveniences, urgency, and accessibility. The total 18.4 percent, that

select strongly agree and agree, hence support the directives base their support for the

directive on the prevalent ATM frauds and non-functionality of off-premise ATMs.


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Table 4.1.2.5 I support CBN Directives of Banks operating ATMs only in their

branches

Frequency Percent

Strongly Agree 21 9.9

Agree 18 8.5Undecided 28 13.2

Disagree 64 30.2

Strongly Disagree 73 34.4

No Resposne 8 3.8

Total 212 100.0


From the descriptive statistics in table 4.1.2.6, it shows that the mean of the

monthly volume of cash transaction is 9452.83; this means that on the average, thevolume of cash transactions of students of the University of Ibadan is N9, 452:83. More

so, the mean of the pre-ATM cash holding is 7568.3962; which mean that on the average,

the students of the University of Ibadan hold N7568:40 for cash transaction of N9,

452:83 before the acquiring of ATM Card.

Also, from the descriptive statistics in table 4.1.2.7, it shows that the mean of the monthly

volume of cash transaction is 9452.83; this means that on the average, the volume of cash

transactions of students of the University of Ibadan is N9, 452:83. More so, the mean of

the post-ATM cash holding is 3545.2632; which mean that on the average, the students of

the University of Ibadan hold N3, 545.26 for the same cash transaction of N9, 452:83

after the acquiring of ATM Card.Table 4.1.2.6 Descriptive Statistics of Pre ATM

Mean Std. Deviation N

Pre ATM Average Cash Holding.7568.3962 8909.30028 212

Monthly Volume of CashTransaction 9452.8302 5696.52272 212

Computed using SPSS


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Table 4.1.2.7 Descriptive Statistics of Post ATM

Mean Std. Deviation N

Post ATM Average Cash Holding.

3545.2632 3795.01953 190

Monthly Volume of CashTransaction

9676.3158 5738.73104 190

Computed using SPSS

4.2 Empirical Analysis

4.2.1 Impact of ATMs on Cash holdings given the Volume of Cash Transactions

This section examine the linear relationship between monthly volume of cash

transaction and average cash holdings before and after the acquisition of ATM Cards, i.e.

the effect that the monthly volume of cash transactions will have on cash holding when

the respondents have no ATM Cards and when they have ATM Cards. The importance of

this approach is that it

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Effect of ATMs on Money Demand of UI Students

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