The Impact Of Monetary Policy On Nigeria Economy

The Impact Of Monetary Policy On Nigeria Economy

Abstract

The humorless anticipation of every frugality over the time has been to attain the loftiest possible position of profitable growth and development. This exploration work is on the ‘’ Impact of Monetary Policy on Economic growth in Nigeria ’’ between the period of thirty times( 30) covered from 1980- 2010. The Impact of financial policy in an frugality has been a nonstop discussion in every frugality especially developing economics which will give rise to profitable growth and development of a nation. In carrying out this exploration, Secondary data was used on PC Give8.00 interpretation package to regress the model with GDP as the dependent variable, and plutocrat force, affectation rate, liquidity rate and interest rate as independent variables. The model explained that the impact of financial policy on profitable growth is statistically significant, through the signs attained from its previous anticipation is appreciatively related to GDP but doesn’t hold strong enough. plutocrat force has a positive relationship and also significant impact on the frugality. Affectation has a negative relationship, while the interest rate and liquidity rate is appreciatively significance on impact of profitable growth. R- Squared show 73 increase on the GDP. It’s thus recommended that some effective programs are to be made in constraints to the in effectiveness of once financial programs which should be excluded.

Chapter One

Background Of The Study

Nigeria still presents a clear reflection of the third world frugality in which the growing frugality has some working ministry, financial and financial programs that are aimed at maintaining a balance in the entire frugality so that growth and development, which is the ultimate thing of every frugality, is realized.

Generally, financial policy refers to combination of measures designed to regulate the values force and cost of plutocrat in an frugality in consonance with the position of profitable exertion. Monetary policy refers to the credit control measure espoused by the central bank of a country.

Monetary policy according to Olumechere( 1988) is a deliberate trouble by the financial authorities to control force and credit conditions for the purpose of achieving certain broad profitable pretensions Johnson K( 1956) define financial policy as policy employing central bank control of the force of plutocrat as an instrument for achieving the objects of general profitable policy.

According to Salvin( 1999) financial policy is the use of open request operations change in reduction rate, change in reserve demand and other measures available to the financial authorities to control the rate of growth of plutocrat force. He further noted that the pretensions of financial policy are price stability relative full employment and satisfactory rate of profitable growth. As

Akatu( 1993) noted, financial policy in the Nigeria environment encompasses conduct of the central bank of Nigeria that affect the vacuity and cost of marketable and trafficker bank reserve balances and thereby the overall financial and credit condition in the frugality. The main ideal of similar action is to insure that over time, the long- run requirements of the growing frugality at stable prices.

The end of financial policy are principally to control the affectation, maintain a

healthy balance of payment positions for the country in order to guard the external value of the public currency and promote an acceptable and sustainable position of profitable growth and development. The expression is done by the civil government, substantially blazoned during budget speeches while the enforcement of the policy is solely the responsibility of the central bank of Nigeria( CBN) yearly.

profitable growth on the order hand according to Kindleberger( 1965) means further affair, while Friedruan John( 1972) defines growth as an expansion of the system in one or further confines without a change in its structure, and development as an innovative process leading to the structural metamorphosis of social system.

This profitable growth is related to a quantitative sustained increase in the countries per capital affair or income accompanied by expansion in its labor force, consumption, capital and volume of trade. An frugality on the other hand can be said to be developed when there’s a quantitative and qualitative increase

in the quantum and quality of goods and services produced in the country. In its widest aspect profitable growth and development implies raising the standard of living of the people and reducing inequalities in income distribution.

According to MichaelP. Todaro/ StephenC. Smith( 2011) development is the process of perfecting the quality of all mortal lives and capabilities by raising people ‟ s situations of living, tone- regard, and freedom.

In utmost countries the central bank is ladened with the responsibility of conducting financial policy. In the case of Nigeria, the responsibility entirely lies with the central bank of Nigeria( CBN). The optional control of plutocrat stock by the financial authority involves the expansion or compression of plutocrat, impacting interest rate to make plutocrat cheaper or more precious depending on the prevailing profitable situation.

The evaluation of financial policy intends to show how this macroeconomic policy is formulated and executed in practice particularly in an terrain of civil government financial dominance and largely liquid banks.

Between April 1992 and March 1976, the use of an aggregate credit ceiling was dropped for specification on several distribution of bank credit throughout the period they also served quitted effectively as instruments of financial control.

The situation was particularly serious between 1982 and 1985 when strict profitable controls weren’t effectively used in arresting the deteriorating

situation. In- evitable a period of profitable adaptation has to come with the preface of the structural adaptation programmed1 in July 1986. Te overall end of the profitable adaptation process embarked upon by the civil government in July 1986 was to restructure the civil product and consumption pattern of the frugality the elimination of price deformation and reduction of the over dependence of the frugality on the import of crude oil painting and conduct the raw accoutrements and consumer goods.

In the course of these design, detailed attention will be paid to financial policy in which its frame work and perpetration will be anatomized and its impact on profitable growth in the period of 1930 to 2010.

Statement Of The Problem

The financial policy executions in the frugality over the once times were mischievous to, and inconsistent with the development requirements of frugality. This concern has wielded pressures on the view to chancing possible results. As

a result of this the structural adaptation program was introduces in the frugality and to liberalized the fiscalsystem.According to Anyanwu( 1993) financial policy is a major profitable stabilization armament which involves measures designed to regulate and control the volume, cost, vacuity and direction of plutocrat and credit in an frugality to achieve macroeconomic

objects or pretensions. The problem lies on making use of policy that will break the profitable problems rather of the frugality to have low position 1of investment, income and also the position of demand and force will reduce.

Another problem is how to restructure the product and consumption pattern of the frugality through the elimination of price deformation.

Another problem is the power response of the fiscal system to financial programs control measures which has to do with lack of translucency in the separation of fiscal interposers. These problems have needed further for result.

Objects Of The Study

The main ideal of the study is to assess the effectiveness of the financial programs in Nigeria and its part in returning the frugality backs to equilibrium after an inflationary imbalance.

The specific objects of this study are

1. To examine the trend and structure of financial policy in Nigeria.

2. To empirically probe the impact o financial policy on Nigeria. frugality

3. To estimate the performance of financial policy in Nigeria over the times under review.

Exploration Thesis

To effectively achieve the over mentioned objects we borrow a null thesis

HO The financial policy instrument doesn’t have significant impact on Nigeria frugality

HI The financial policy instruments have significant impact on Nigeria. Economy

Significance Of The Study.

Establishing a financial policy frame that follows and builds on recent literal experience around the world in Nigeria which should bring about profitable growth and development. The financial control measures which relies heavily on credit ceiling and picky credit controls, decreasingly failed to achieve the set financial targets as their perpetration came less effective with time. The significance of the study are

1. To insure the effective and effective control of the plutocrat in the economics.

2. To insure the achievement of asked public objects.

3. It influences the direction of profitable progress in the country.

4. To find out the effectiveness of financial policy in achieving profitable growth during the period under study( 1980- 2010).

Limitation Of The Study

The major limitation of the study is that of data insufficiency which makes it insolvable for the study to borrow a invariant time frame for all the channels. A study of these natures can not be done without some problem and as similar it was constrained by numerous factors similar as

FINANCE Financial inadequacy was the major limitation for this work. The experimenter was financially independent as a pupil the need for material passages and logistics demanded for this exploration wasn’t adequately handed.

Compass Of The Study

The exploration work deals on the impact of financial policy on profitable growth in Nigeria. This exploration work is covers the period between 1980- 2010. The data used is a secondary data, which was attained from the publication of central bank of Nigeria statistical bulletin and the periodic reports of accounts.

The logical tools employed on this exploration include to test and retrogression analysis.