IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 2 NO. 5 2016

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Impact of Monetary Policy in Nigeria on Inflation, Exchange Rate and Economic Growth

Balami Dahiru Hassan, Ahmed Funmilola Fausat, Yusuf Adamu Baba

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Abstract

This paper reviewed the framework for monetary policy decisions and the effectiveness of monetary policy implementation in the Nigerian economy by analysing the impact of the policy on inflation, exchange rate and economic growth. The analysis utilized both primary and secondary information. The review revealed that some Central Bank of Nigeria (CBN) policies have been under criticism because not all monetary policy tools favour all economic agents. Monetary policy involves trade off because of its implication on the whole economy and each economic agent will react to each monetary policy depending on the degree it negatively or positively affects its business or activity. Policy makers, therefore, may decide to grow the economy during stagflation in the short and medium terms before turning to inflation because of the favourable implications of growth on the economy. For the foreign exchange market, monetary policy makers will have to analyse the fundamentals of export and import as well as the country’s elasticity to export before taking policy on whether to devaluate or not. However, other challenges such as wide gap between the official market (N197.00k) and the black market (N322.00k) which does not favour devaluation within the short run and medium term would require concerted effort. Hence, there is need for policy makers to act in order to reduce round-tripping which is unhealthy to the economy. Also, for effective economic growth and development, it is expedient that monetary policy must be supported by fiscal policy.

keywords:

Monetary Policy; Inflation; Exchange Rate; Economic Growth.

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