Monetary Policy Operation and Economic Growth in Nigeria: Evidence from 1990 – 2022 (Published)
The study examined monetary policy operations and economic growth in Nigeria from 1990 to 2022. The primary purpose is to evaluate the impact of monetary policy operations on Nigeria’s economic growth. The data for the study were obtained from National Bureau of statistics (NBS) databased and Central Bank of Nigeria CBN statistical bulletin. The econometric methods of OLS, Co-integration, Variance Error Correction Mechanism (VECM) and Vector Error Correction Model (VECM) were employed to examined the interplay among the critical variables. The natural log of real GDP was employed as the variable of interest while exchange rate and inflation rate as instrument of monetary policy operations. The result of the VECM shows that the overall model is satisfactory given the coefficient of determination of 34 percent and f-statistics of 3.37. The study discovered that the explanatory variables were not statistically significant at 5% level in stimulating economic growth in Nigeria. However, the long run dynamic result also shows that there exists a long-run relationship or equilibrium among the variables. The result of VARM revealed that exchange rate has positive coefficients, indicating a positive relationship with the lagged RGDP. The model has a moderately high R-squared value (0.9429), indicating a reasonably good fit. While inflationary rate indicates negative coefficients with the lagged exchange rate. The model has a lower R-squared value (0.2862), indicating a weaker fit to the data. These finding hold significant implications for the Nigerian economy, highlighting the effectiveness of monetary policy, the importance of exchange rate stability, and the imperative of inflation control in promoting sustained economic growth. Policymakers are urged to prioritise evidence-based decisions, long-term planning, and target interventions to harness the full potential of monetary policy in driving sustainable economic development in Nigeria.
Keywords: Exchange Rate (EXR), Inflation Rate (IFR), Monetary Policy, Real Gross Domestics Products (RGDP), economic growth