Analyzing the Influence of Monetary Policy on Nigeria's Economic Expansion

This paper examined the connection between key monetary policy indicators and economic growth in Nigeria. The analysis was conducted using the Autoregressive Distributed Lag (ARDL) bound co-integration method. It estimated both the short-run and long-run effects of monetary policy on economic growth, utilizing secondary data from 1981 to 2022. The data, sourced primarily from the Central Bank of Nigeria Statistical Bulletin, revealed a long-run relationship between the variables. Contrary to initial expectations, the findings revealed Cash Reserve Ratio and Monetary Policy Rate had an insignificant impact on Real GDP, suggesting that changes in these indicators did not substantially influence economic growth. The Treasury Bill Rate and Exchange Rate showed a positive but insignificant effect on real economic growth. The study also found that Cash Reserve Ratio and Monetary Policy Rate had a negative yet insignificant effect on interest rates, implying that shifts in these variables did not significantly alter investment levels. However, the results indicated that Cash Reserve Ratio and Monetary Policy Rate could potentially lower overall interest rates, thereby encouraging investment and boosting real GDP. Additionally, the study highlighted the positive influence of savings and investment on economic growth. On the other hand, the Exchange Rate and Treasury Bill Rate were positively but insignificantly related to interest rates, suggesting their potential use in raising interest rates to manage liquidity, which could affect both investment and growth. Lastly, the study proposed that Treasury Bill Rates could help increase interest rates and absorb liquidity, thereby moderating investment and overall economic growth.