Monetary Policy and Nigeria’s Economy: An Impact Investigation

Abstract

The major objective of this study is to empirically analyze the impact of monetary policy on the economy of Nigeria. To achieve this major objective, the study made use of broad money supply (M2) and credit to the private sector (CPS) as the independent variables explaining the dependent variable which is the Gross Domestic Product (GDP). The time series data employed cover the period of 1996 to 2016 and have been collected from the Central Bank of Nigeria Statistical Bulletin. The statistical tool used in this study is the multi regression and student t-test with the aid of statistical package for social sciences (SPSS) to analyze the impact of the individual explanatory variables on the economy. The result indicates that the monetary policy in Nigeria does not have significant impact on the economy. At 5% level of significance, the broad money supply (M2) is 0.36 > 0.05 while the CPS shows 0.22 > 0.05. The result proves that the broad money supply has not been properly regulated and the bank lending rate to the private sectors so high that the economy has been adversely affected. The study therefore, recommends that the Central Bank of Nigeria should put every machinery in place to ensure that the monetary policy is geared towards economic growth through substantial reduction of bank lending rate to the private sector and proper regulation of broad money supply.