The IUP Journal of Bank Management
Impact of Monetary Policy on Nigeria's Economic Growth

Article Details
Pub. Date : Aug, 2022
Product Name : The IUP Journal of Bank Management
Product Type : Article
Product Code : IJBM040822
Author Name : Ukangwa Jane Uchechi, Ikechi Victor Iheukwumere and Ogonda Gift Orokwele
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 14



One of the major objectives of the monetary policy in Nigeria is economic growth using money supply and inflation control (price stability) as a measure; but despite the various monetary regimes that have been adopted by the Central Bank of Nigeria over the years, inflation still remains a major threat to its economic growth. And it is on this premise that this study analyzes the impact of monetary policy on Nigeria's economic growth from 1981 to 2021. The study uses secondary data sourced from Central Bank of Nigeria's Statistical Bulletin (2021) for its analysis, and employs Autoregressive Distributed Lag (ARDL) bound cointegration to estimate the short-run and long-run impact of the monetary policy on Nigeria's economic growth, which shows a long-run relationship. Further estimation results show that monetary policy impacted Nigeria's economic growth. The study claims that the central bank should place more emphasis on the quality-based nominal anchor (M2) for managing instruments like liquidity ratio, reserve ratio, and transaction on Treasury bills which directly affect the monetary aggregate.


Monetary policy refers to a combination of measures designed to regulate the value, supply and cost of money in an economy, in consonance with the expected level of economic activity. For most economies, the objectives of monetary policy include price stability, maintenance of balance of payment equilibrium, promotion of employment and output growth and sustainable development (Folawewo and Osinubi, 2006). Indeed, an unsustainable or crisis-ridden economy is able to meet the transmission mechanism of monetary policy less effectively, making the achievement and maintenance of strong macroeconomic fundamentals difficult. This is because it is only in a period of price stability that investors and consumers can interpret market signals correctly. In Nigeria, since the establishment of the Central Bank of Nigeria (CBN), monetary policy has continued to play the traditional role expected of a central bank. This role is the regulation of money in such a way as to promote social welfare. This role is anchored on the use of monetary policy that is usually targeted towards the achievement of full employment