Monetary Policy and Economic Performance in Nigeria

Abstract

The study examines the impact of monetary policy on the Nigerian economy; for the period1996-2019. Secondary data were collected from Central Bank of Nigeria Statistical Bulletin, 2020.The study used Gross Domestic Product as proxy for Nigerian economy and used as the dependent variable; while, monetary policy rate, cash reserve requirement and liquidity ratio are used as independent variables to measure monetary policy. Hypotheses were formulated and tested using Ordinary Least Square (OLS). The study reveals a positive significant impact of monetary policy rate, on Gross Domestic Product in Nigeria. Cash reserve ratio has a positive significant impact on Gross Domestic Product. Liquidity ratio has significant impact on Gross Domestic Product in Nigeria. The coefficient of determination indicates that about 62% of the variations in performance of Nigerian economy can be explained by changes in monetary policy variables (TB, CRR and LR) in Nigeria. The study concludes that monetary policy had significantly affected performance of Nigerian economy. The study recommends that policy makers should formulate monetary policies that would stimulate the economy. Financial institution and banks should formulate strategy to sign up profitable portfolios so as to remain in business in case of increase in the cash reserve requirement. Policy makers should ensure consistency of monetary policy in the economy before reviews, so as to measure its impact on the economy. Regulatory authorities will need to build a strong synergy between monetary policy and banking institutions so as to chart a common course for the performance of the economy.

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