THE IMPACT OF MONETARY POLICY ON ECONOMIC GROWTH IN NIGERIA

THE IMPACT OF MONETARY POLICY ON ECONOMIC ROWTH IN NIGERIA

ABSTRACT

This study examined the effect of monetary policy on the Nigerian economic growth and also ascertained the relationship between the monetary policy and interest rate target, for the period of 2000-2014. The data used in running the analysis are Broad money supply (M2), Real interest rate (RIR), Real exchange rate (REXR) and Gross domestic product (GDP). The data was sourced secondarily from CBN statistical bulletin 2014. The ordinary least square method (Multiple Regression) was used to analyze the data, in which GDP is the dependent variable while Broad money supply (M2), Real interest rate (RIR), and Real exchange rate (REXR), are the dependent variables. From the findings, there is a positive relationship between money supply and economic growth. A positive relationship was found to exist between real exchange rate and economic growth while, real interest rate exhibited a negative association with economic growth. The researcher concluded that monetary policy can drive economic growth through money supply, exchange rate and interest rate. Based on the fact that economic growth is being influenced by monetary policy in Nigeria, the researcher therefore recommends that government should make favourable policies that would spur economic growth through proper monetary policy formulations.