Effects of monetary policy on inflation in Nigeria (1986-2013)

TITLE PAGE
THE EFFECT OF MONETARY POLICY ON INFLATION IN NIGERIA
(1986-2013)
BY
OLUWATIMILEHIN A. OYEKUNLE
12/27ED/062
BEING A RESEARCH PROJECT SUBMITTED TO THE
COLLEGE OF HUMANITIES, MANAGEMENT AND SOCIAL SCIENCES,
DEPARTMENT OF ECONOMICS AND DEVELOPMENT STUDIES
KWARA STATE UNIVERSITY
IN PARTIAL FULFILMENT OF THE REQUIREMENT OF THE AWARD OF
BACHELOR OF SCIENCE (B.Sc) DEGREE IN ECONOMICS
MAY, 2016
1
CERTIFICATION
I hereby certify that this research work was carried out by Oluwatimilehin A Oyekunle
with matric number 12/27ed/062 in the Department of Economics and development
studies, College of Humanities, Management and social sciences, Kwara State University
Malate. The project has been read and approved as meeting of the requirements for the
award of Bachelor of Sciences (B.Sc. Hons) Degree in Economics.
-------------------------------------------------------
-
PROF. LANSANOU KEITA Date
Supervisor
--------------------------------------------------------
-
PROF. LANSANOU KEITA Date
Head of Department
------------------------------- --------------------------
PROF. SAKA MAMUD Date
Provost of College H.M.S.S
-----------------------------------------------------------
-
External Examiner Date
2
DEDICATION
I dedicate this project work to Almighty God, and to my loving parents
Mr. T.A and Mrs. M.E OYEKUNLE for all their support throughout the
pursuit of my academic careers. I equally dedicate it to the rest of my
family and my unborn children.
3
ACKNOWLEDGEMENT
My in depth gratitude goes to Almighty God for His blessings,
favour and mercy. I am grateful for his endless love, protection,
guidance, grace and showers of blessings upon me and my family.
I also magnify the name of the God for his provision towards my
tuition fees and also for the divine wisdom, knowledge and
understanding.
I express my profound appreciation to my loving and caring
families, Mr. T.A OYEKUNLE, Mrs. M.E OYEKUNLE and my lovely brothers
which are Mr. O.K OYEKUNLE(Corewell), Adeniyi OYEKUNLE (Solarwilly),
Ayodele OYEKUNLE (Hayo Clothing) and my sisters Omolara AYORINDE
and Aminat BABATUNDE.
Besides, I thank my amiable supervisor Prof. Lansanou Keita for
pains in taking time to look into my project work despite his tight
schedules May the almighty grant him his heart desires (amen). Also, I
want to appreciate all lecturers in the department of economic that
have taken me one course or the other. Thank you so much.
4
I also want to appreciate all Kwasu Baptist Student Fellowship
family and my decorating unit members (2015/2016 session) for their
prayers and support. I cannot but remember my friends in school Zee,
Jamiu (osha), B.E.B, Johnson (prof), Toyosi, Kudrat, Tolu, Lekan (lekkyl),
Wale, Bunmi, A.Ife, Kemi, Damola, Suliat, Stephen, Olamoney, Boda
Luku, Richky, Slimkris, Horlano and all current economic May
the Almighty God crown all your e=orts.
My appreciation also goes to Yusuf Babatunde and Olaitan Saka
for their hospitality and for taking me has a brother, may God almighty
bless you two and your entire family. My special thanks once again go
to my father, my lovely mother, Olawale oyekunle, Mrs Babatude and
Mrs. Abidoye for their support morally, lly and spiritually
throughout till the completion of my programme.
5
ABSTRACT
This paper focuses on the effect of monetary policy on inflation in Nigeria, using time
series data from 1986-2013 obtained from the Central Bank of Nigeria’s Statistical
Bulletin. The main purpose is to investigate the extent to which the apex monetary
authority- the Central Bank of Nigeria has addressed adverse changes in price, output
and interest rates through the use of monetary policy instruments. For this analysis,
ordinary least square, ADF and Durbin Watson statistics was adopted. The findings show
that the level of significant was 1% (0.01) and maximum lag 1(one). It then shows that
three of the variables which are INF, INTR and M2 have unit root at first order or level
and GDP at second order or level. It also shows that monetary policy has a positive and
significant relationship with the general price level. It equally reveals that interest rate
exerts a negative and significant influence on inflation and on the other hand gross
domestic product has a negative and significant influence on inflation. The paper
therefore recommends among others that the autonomy granted the CBN should be
sustained and even strengthened since it is only an independent monetary authority that
can pursue the objective of price stability at the cost of other objectives.
6
TABLE OF CONTENTS
TITTLE PAGEi
CERTIFICATIONii
DEDICATIONiii
ACKNOWLEDGEMENTiv
ABSTRACTv
TABLE OF CONTENTSvii
CHAPTER ONE
1.0Introduction
1
1.1Background to the Study
1
7
1.2Statement of the Problem
7
1.3Objective of the study
8
1.4Statement of hypothesis
9
1.5Signi
9
1.6 Scope and Limitation of the Study
9
1.7 Organization of the study
10
CHAPTER TWO
2.0Introduction
11
2.1Conceptual Review
11
2.1.1Conceptual Definition of Monetary Policy11
2.1.2 The Objectives of Monetary Policy in Nigeria 12
8
2.1.3Instrument of Monetary Policy in Nigeria15
2.1.4Monetary Policy Regimes in Nigeria18
2.1.5Monetary Policy Before the Structural Adjustment Programme (Sap)18
2.1.6Monetary Policies under the Structural Adjustment Programme (SAP)22
2.1.7Nigeria’s Monetary Policy and the Demand for Reserve Currencies27
2.1.8Concept of Inflation30
2.1.9Effects of Inflation31
2.1.10 Measures of Inflation31
2.1.11Measures To Control Inflation32
2.2Theoretical Review33
2.2.1Demand-Pull Inflation or Monetary Theories of Inflation33
2.2.2Keynes’s Theory of Demand-Pull Inflation34
2.2.3Cost-Push Inflation37
2.2.4Theories of Monetary Policy39
2.3Empirical Review47
CHAPTER THREE
3.0Introduction53
3.1 Sources of Data53
9
3.2Model Specification 53
3.3Estimation Technique55
3.4Evaluation Criteria56
CHAPTER FOUR
4.1 Introduction 59
4.2Presentation and Evaluation of Regression Result59
4.2.1The Test for the Unit Root ADF (Augmented Dickey-Fuller Test)59
4.2.2Regression Analysis60
4.3Interpretation of the Result61
4.4Evaluation Base on Statistical Test 62
4.4.1T-Statistics62
4.4.2F-statistics63
4.4.3Trend of Inflation64
4.5 Evaluation Base on Economic Theory64
4.5.1 Trends between inflation and interest rate66
4.5.2Trends between inflation and GDP67
4.6Econometric Criteria 67
4.6.1Test for Autocorrelation67
10
4.6.2Test for Heteroscedasticity68
CHAPTER FIVE
5.1 Summary of the study69
5.2Conclusion 70
5.3Policy Recommendation70
REFERENCES72
APPENDIX75
11

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APA

Oyekunle, O. (2018). Effects of monetary policy on inflation in Nigeria (1986-2013). Afribary. Retrieved from https://afribary.com/works/effects-of-monetary-policy-on-inflation-in-nigeria-1986-2013-docx

MLA 8th

Oyekunle, Oluwatimilehin "Effects of monetary policy on inflation in Nigeria (1986-2013)" Afribary. Afribary, 30 Mar. 2018, https://afribary.com/works/effects-of-monetary-policy-on-inflation-in-nigeria-1986-2013-docx. Accessed 15 Apr. 2025.

MLA7

Oyekunle, Oluwatimilehin . "Effects of monetary policy on inflation in Nigeria (1986-2013)". Afribary, Afribary, 30 Mar. 2018. Web. 15 Apr. 2025. < https://afribary.com/works/effects-of-monetary-policy-on-inflation-in-nigeria-1986-2013-docx >.

Chicago

Oyekunle, Oluwatimilehin . "Effects of monetary policy on inflation in Nigeria (1986-2013)" Afribary (2018). Accessed April 15, 2025. https://afribary.com/works/effects-of-monetary-policy-on-inflation-in-nigeria-1986-2013-docx

Effects of monetary policy on inflation in Nigeria (1986-2013)

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