MONETARY POLICY AND ECONOMIC GROWTH IN NIGERIA
Abstract
Abstract
This study was embarked upon to ascertain the impact of monetary policy on economic
growth in Nigeria for the periods 1991-2023. Prior to empirical testing, preliminary test
were carried out to ascertain the level characteristics of the dataset. Empirical testing
was conducted under the ordinary least square framework. Monetary policy was
measured using external debt (ED), money supply (MS), liquid ratio (LR), and interest
rate (INT). Economic growth was measured using the real gross domestic product
(RGDP). Empirical result revealed a mixed relationship between monetary tools and
economic growth. ED and MS were found to be positively and significantly related to
economic growth. On the contrary, LR and interest rate were found to have an
insignificant negative relationship with economic growth. Premise on findings, the study
concluded that the relationship between monetary policy and economic growth depends
on the particular instrument used at that period in time. Hence, the study recommended
that monetary authority trap the disconnection between the formal and the informal
credit sectors of economy. Due to the dualistic nature of Nigerian economy, the flow of
credit and interest rate mechanism in the informal sector is not accounted for by the
monetary authorities and this is most cases lead to counter effect to monetary policies in
Nigeria.
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