Impact of Monetary Policy Measures on Economic Growth in Nigeria

Abstract

This study investigates the impact of monetary policy measures, such as money supply, exchange rate, and liquidity ratio concurrently, on economic growth in Nigeria from 1987 to 2022. Real gross domestic product (RGDP) was the dependent variable with monetary policy (MP) and liquidity ratio (LR) as the independent variables while exchange rate (EXR) as the control variable. Data for the study were obtained from CBN statistical bulletin and WDI. Utilizing the ADF and PP tests were utilized for analyses, while the ARDL bound tests was adopted for cointegration between the variables. It was found that money supply (MP) has a significant negative short-run impact, while liquidity ratio (LP) and exchange rate (EXR) have significantly negative long-run impacts on Nigeria's economic growth. Moreover, it was further discovered that all the explanatory variables are crucial in ascertaining economic growth of Nigeria, based on the statistical significance. It is recommended that policies that ensure credit availability in deposit banks should be implemented to increase the liquidity of money available to investors for economic boost and that exchange rate stability policies such as increasing foreign exchange reserves be considered necessary.