MONETARY POLICY AND ECONOMIC GROWTH IN NIGERIA (FROM 1986-2021)
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
MONETARY POLICY AND ECONOMIC GROWTH IN NIGERIA (FROM 1986-2021)
Chapter One
Abstract
The goal of this research effort is to examine the relationship between monetary policy and economic growth in Nigeria. The paper also discusses the goals and objectives of monetary policy, which include price stability, maintaining balance of payment equilibrium, promoting employment, combating inflation, output growth, and sustainable development.
The literature review shed further light on the conceptual and evolutionary framework of Nigerian monetary policy, a review of monetary policy prior to the structural adjustment plan (SAP), and an assessment of monetary policy performance in Nigeria were comprehensively examined.
Also, appropriate measures for managing inflation in the economy were suggested based on the research instruments and techniques, as it was discovered that there are leakages in the velocity of money due to corrupt practices in the system and diabolic means of creating cash flow, resulting in inflation, multiplicity of unemployment, and low output growth.
The study also examined the relationship between gross domestic product (GDP) and other monetary policy variables (real exchange rate, real interest rate, money supply, and liquidity ratio) and their respective contributions to the economy.
Finally, this initiative proposes a comprehensive strategy for combating corruption through the use of various law enforcement agencies throughout the country.
Chapter one
Introduction
Background of the study.
Since its formation in 1959, the Central Bank of Nigeria (CBN) has continued to play the conventional job of a central bank, which is to regulate the money supply in order to promote social welfare.
This position is based on the implementation of monetary policy, which is often aimed at achieving full employment equilibrium, rapid economic growth, price stability, and external balance (Fasanya et al, 2013).
These goals are crucial for achieving internal and external balance and promoting long-term economic growth. Evidence from the Nigerian economy shows that there has been a relationship between the stock of money and economic development or activity since the 1980s.
Nigeria has controlled its economy over the years by varying its money supply. Thus, monetary policy refers to government acts aiming to influence the conduct of the monetary sector.
Over time, the two latter aims have frequently served as the primary goals of monetary policy. Thus, inflation targeting and exchange rate management have dominated the CBN’s monetary policy attention, assuming that they are critical tools for attaining macroeconomic stability (Ajayi, 1999).
Monetary policy has been used in Nigeria since the Central Bank of Nigeria was tasked with creating and implementing it by the Central Bank Act of 1958.
This position has permitted the formation of an active money market, in which treasury notes, a financial instrument used for open market operations and debt financing for the government, have risen in volume and value, becoming a key earning asset for investors and a source of market balancing liquidity.
Monetary policy has two primary objectives: to generate maximum sustainable output and employment and to maintain a sustainable price level in the economy. Stabilising output in the short run and fostering price stability in the long run requires numerous strategies.
First, the central bank attempts to estimate how the economy is doing now and how it is likely to perform in the medium term. It then compares these estimates to its output and price level goals; if there is a gap between the estimates and the goals, the CBN must decide how forcefully and quickly to act to close the gap.
Estimates of present economic conditions are rarely as consistent as the most recent data on important indicators such as employment, growth, and productivity, which generally reflect past conditions.
To obtain a reasonable estimate of current and medium-term economic conditions, the central bank seeks to identify the most relevant economic developments, such as government spending, economic conditions abroad, financial conditions at home and abroad, and the adoption of new productivity-boosting technologies.
These events are put into an economic model to predict how the economy will evolve over time. In doing so, the central bank is presented with unanticipated developments, such as the Niger- Delta conflict
which disrupted oil production and hindered the government’s revenue generation; as a result, they must incorporate uncertainties into their model.
Uncertainty appears to be a concern at every stage of the monetary policy process, and policymakers have yet to develop a set of policies and procedures to deal with all possible scenarios (Chimezie, 2012).
Indeed, the central bank devotes a significant amount of time and effort to investigating various approaches to dealing with different types of situations.
Need help with a related project topic or New topic? Send Us Your Topic