MONETARY POLICY MANAGEMENT AND ECONOMIC GROWTH IN NIGERIA: NEW LESSONS RELEARNED

Abstract

This research study examines the existing links between monetary policy management and economic growth in Nigeria within the period 1960-2018. An autoregressive distributed lag (ARDL) approach was employed to evaluate the cointegration as well as the short-run and long-run estimates. The findings showed that a long-run relationship exists between monetary policy and economic growth within the periods understudied. Concerning the estimated parameters, the results reported that interest rate, deposit rate and liquidity ratio positively drive short-run output growth whereas, monetary policy rate, Treasury bill rate, and cash reserve ratio have a direct impact on short-run output growth in Nigeria. Meanwhile, in the long-run, monetary policy rate and deposit rate enhance real income growth, while Treasury bill rate and cash reserve ratio negatively affect output growth of the Nigerian economy. On the policy front, there is need for the apex bank to harmonize the expansionary part of the monetary policy with the contractionary part during the implementation process of the recent Economic Recovery and Growth Plan (ERGP) in 2017 aimed at turning the slump situation around and also projecting a strong growth rate in GDP at 4.5%.