IMPACT OF MONETARY POLICY INSTRUMENTS ON THE ECONOMIC GROWTH OF NIGERIA, 1982-2011
Since the expositions of the key role of monetary policy in influencing macroeconomic objectives like economic growth, price stability and host of other objectives, monetary authorities are saddled with the responsibility of fashioning appropriate monetary policy instruments that can be effectively used to grow their economies. However, despite the various monetary measures or instruments adopted by the monetary authorities to enhance rapid and sustainable economic growth and given the prominence of monetary policy in macroeconomic management in Nigeria over the years, growth has not accelerated. Instead of growing, the country has witnessed relatively low and unstable economic growth, poor income redistribution and increased poverty level as represented by its per capita income. The perceived ineffectiveness of monetary policy impact can be submitted as ineffectiveness or failure of the instruments deployed – all things being equal. It was against this background, therefore, that this study sought to examine how; (i) effective the use of Treasury bill rate as (a proxy to Open Market Operation) has impacted on the growth of Nigeria’s Real Gross Domestic Product, (ii) the use of Broad Money Supply (M2) as a monetary tool has fared in stimulating the growth of Nigeria’s RGDP, (iii) Liquidity Ratio (Lr) has impacted on the growth of Nigeria’s RGDP, (iv) effective the use of Monetary Policy Rate (MPR) as a monetary instrument has impacted on the growth of Nigerian’s RGDP. Ex-post-facto research design was adopted. Time series data for 30-years period covering 1982 – 2011 were collated from secondary sources that included Central Bank of Nigeria published annual reports and statistical bulletin. Four hypotheses were formulated for the study and tested using a multiple regression model. Economic growth proxied by growth of Real Gross Domestic Product was adopted as the dependent variable, while the independent variable included Treasury Bill Rate (TBR), Broad Money Supply (M2), Liquidity Ratios (LR) and Monetary Policy Rate (MPR). Results show that (i) Treasury bill rate has a positive and significant impact on Nigeria’s RGDP, (ii) Broad Money Supply (M2) exhibited a negative and insignificant impact on Nigerian’s RGDP, (iii) Liquidity ratio has negative and insignificant impact on Nigerian’s RGDP and (iv) Monetary Policy Rate (MPR) has positive and significant impact on Nigeria’s RGDP. The policy implication arising from the findings is that the monetary policy instruments showed a mix result in terms of their impact on Nigeria’s RGDP. The study therefore recommends among others that Nigeria should adopt a macro mix of monetary, fiscal and exchange rate policies because of the relative weakness of the use of monetary policy alone in engendering economic growth.