Monetary Policy and People’s Socio-Economic Welfare in Nigeria

Abstract

This study examined the effect of monetary policy on the socio-economic welfare of Nigerians between1980 and 2021 from three perspectives: income, health and education. We assessed the short and long run effects of six monetary policy variables (lending rate, savings deposit rate, liquidity ratio, monetary policy rate, loan deposit ratio and private sector credit to gross domestic product ratio) and inflation (control variable on three different socio-economic welfare variables (gross domestic product per capita, child mortality rate and primary and secondary school enrolment) during the study period.Results of the auto-regressive distributed lag (ARDL) technique show thatrevealed interest rate, liquidity rate and private sector credit have negative and significant effect on the per capita income while savings deposit rate, monetary policy rate, loan deposit rate and inflationhvesa positive and significant on per capita income. In the long run liquidity ratio and monetary policy rate have significant positive effect on income per capita while the ratio of private sector credit to GDP has a significant negative effect on it. Inflation has a positive but insignificant effect on per capita income. Furthermore, in the short run, all the selected monetary policy variables have significant effects on child mortality rate. While the effect of interest rate, liquidity ratio and monetary policy rate is negative, that of savings deposit rate, loan deposit ratio, private sector credit and inflation is positive. On the long run, interest rate, private sector credit and inflation have positive effect on child mortality but whereas the effect of interest rate is insignificant, the other two have significant effect. Regarding number of school enrolment, in the short run, interest rate has a negatively significant effect while liquidity ratio, loan deposit ratio and inflation have direct positive effect on it. Savings deposit rate has an insignificant positive effect on it while private sector credit has a negative insignificant effect on it. On the long run, interest rate, private sector credit and inflation have an insignificant positive effect on the number of primary and secondary school enrolment. Savings deposit rate, monetary policy rate and loan deposit ratio have insignificant negative effect on it. The effect of liquidity ratio is significantly positive. The study concluded that monetary policy has significant effect the socio-economic welfare life of Nigerians both in the short and long run. The study recommends the sustenance of the existing liquidity ratio and monetary policy rate due to their favourable effects on the people’s welfare.