Monetary Policy and Private Sector Performance in Nigeria (1995-2020)

Abstract

The study examines the impact of monetary policy on private sector performance in Nigeria; for the period 1995-2019. Secondary data were used and collected from the Central Bank of Nigeria Statistical Bulletin. The study used Private Sector Output is proxy for Private Sector performance and employed as the dependent variable; whereas, broad money supply, liquidity rate and Credit Ratio respectively were used as the explanatory variables to measure monetary policy. Hypotheses were formulated and tested using time series econometric techniques. The study revealed a significant effect of credit ratio on private sector output in Nigeria. Liquidity ratio had a significant effect on private sector output in Nigeria. Broad money supply had a significant effect on private sector output in Nigeria. Hence, there is a long-run equilibrium effect on monetary policy and the private sector economy in Nigeria; and, the result confirms that about 73% short-run adjustment speed from long-run disequilibrium. The coefficient of determination indicated that about 65% of the variations in private sector led- economy can be explained by changes in monetary policy variables. The study concluded that monetary policy had impacted significantly on private sector growth in Nigeria. The study recommended that strong macroeconomic policies should be employed to maintain and stabilize the economy. CBN should lay down strict prudential guidelines to stabilize and strengthen the private sector led-economy. Government and policy makers should formulate policies that will increase the flow of investable funds and improves the capacity of private economy.