THE ROLE OF MONETARY POLICY MEASURES IN THE CONTROL OF INFLATION IN NIGERIA

Abstract This study investigates the relationship between monetary policy measures and inflation in Nigeria from the period of 2002 to 2021. Inflation is used as the dependent variable, while monetary policy measures; Monetary Policy Rate (MPR), Liquidity Ratio (LR), Money Supply (M2) and Treasury Bill Rate (TR) were considered independent variables. The secondary data were collected in Central Bank of Nigeria Statistic Bulletin and World Bank Data Statistics. Multiple regression analysis are used to analyze the data with the use of E-views computer package. The result discovers that the collective variation of the monetary policy measures MPR, LR, M2, and TR at 5% level of significance, has no significant effect on inflation in Nigeria as confirmed by the F-ratio test. Therefore, there is no significant relationship between monetary policy and inflation in Nigeria. The individual t-test shows that the direct effects of each of monetary policy rate, liquidity ratio, money supply and Treasury bill rate on inflation is not significant at 5% level of significance. It is therefore recommended that the monetary authorities should ensure that the target of every monetary policy effort must be specified and screened to avoid conflicting goals in the use of monetary policy measures in actualizing inflation stability or moderation. Treasury bill rate is not very sensitive to inflation as shown in the t-test and therefore should not be more proactive in its attempt to regulate money supply in the economy. The CBN should also be more proactive at disciplining deposit money banks and microfinance banks which does not comply with the liquidity requirements of the CBN, as most banks defaults in complying with the liquidity ratio in order to satisfy their profitability goals at the detriment of the economic condition (high inflation).