A Critical Understanding of the Impact of Monetary Policy on Nigerian Indigenous Firms: Lessons from Ten Years of Military Leadership, After 2nd Republic Nigeria (1983 – 1992)

Abstract

The contradictory activities of the Apex Bank (Central Bank of Nigeria, which was contractionary) and that of the Commercial and Merchant Banks (which was expansionary), revealed the ineptitude of the Apex Bank, or its leadership, to effectively re-direct the economy towards sustainable development. The persistent above the maximum 16% loanable funds given to small-scale indigenous firms (16% in 1983; (1985, 1986; 18.7% in 1987; 21% in 1988, 1989; 22.9% in 1990; 20% in 1991-1992) is the Achilles-Heel, the missing link in adequate macroeconomic management of the real sector productivity and employment. The resultant excess liquidity of the economy had cataclysmic effect on inflation making cost of capital expensive and thus, adversely affected Balance of Payment and employment. In all, precautions should be taken against expansionary policies as well as accretion of foreign assets (net) and other assets in the hope to actualize the policy objective.