EVALUATING MONETARY POLICY'S ROLE IN DRIVING ECONOMIC GROWTH IN NIGERIA

Abstract

This study examined the relationship between monetary policy variables and growth of the real sector in Nigeria. Time series data were sourced from Central Bank of Nigeria statistical bulletin from 1987-2021. Manufacturing sector gross domestic product was used as dependent variables while open market operation, monetary policy rate, Treasury bill rate and real interest rate were used as independent variables. Multiple regressions with econometrics view statistical package were used as data analysis techniques. Co-integration, Granger Causality Test and Augmented Unit Root Test were used to determine the long and the short run relationship that exist among the variables. The adjusted R2 from the model proved that the independent variables can explain 73 percent changes on the growth of manufacturing sector. The study conclude that open market operation have positive and significant relationship with growth of the manufacturing sector, that monetary policy rate have positive and significant relationship with growth of the manufacturing sector, that treasury bill rate have positive and significant relationship with growth of the manufacturing sector while real interest rate have negative and significant relationship with growth of the manufacturing sector. The study recommend that the monetary authority should devise measures of managing the variation in indirect monetary policy variables. The regulatory authorities should strengthen its operational structure to enhance the operational efficiency of the financial market to attract foreign investors. The monetary authorities should strengthen indirect monetary policy variables as well as macroeconomic environment that encourages stability in the variables. Government through Central Bank of Nigeria should strengthen existing policies on the monetary policy instruments so as to increase and stabilize money supply in the economy.