Monetary Policy Transparency: Evidence from Central Bank of Nigeria (CBN)

Abstract

The idea of transparency in monetary policy has gained significant attention in the last two decades both in the academia and Central Banking Circle. As such, a number of Central Banks in the World, CBN inclusive subscribed to the trend toward a more transparent monetary policy framework. The degree of transparency is claimed to vary across Central Banks and monetary policy framework. Therefore, its effects may likely vary. This study measures monetary policy transparency using the case of Nigeria’s apex Bank (CBN) by employing the Eijffinger and Geraat (2006) Index. We based our analysis on information provided by CBN from 2007-2015. The result indicates that CBN had a score of 11 out of 15 points. Considering the aggregate score, CBN can be regarded as being transparent in its monetary policy. However, looking at specific transparency dimensions, it is clear that CBN exhibits weak performance in the economic and operational dimensions which constitute important aspects of transparency. The release of accurate data on key economic variables and disclosure of policy models used for policy analysis would enhance the process of coordinating private agents’ expectation toward fundamentals as well as strengthen their confidence on the monetary authority, thereby boost credibility. We recommend on this basis for CBN to partner with National Bureau of Statistics to gain access to data on unemployment and capacity utilization and on more frequent manner. This paper generally recommend that CBN should explicitly provide wide-ranging and accurate information on monetary policy, data on key variables relevant for policy decisions and macroeconomic model used for policy analysis in a timely and more frequent manner.