MONETARY POLICY AS A TOOL OF ACHIEVING PRICE STABILITY IN THE NIGERIA ECONOMY


MONETARY POLICY AS A TOOL OF ACHIEVING PRICE STABILITY IN THE NIGERIA ECONOMY  

ABSTRACT

The subject matter of inquiry is "Monetary Policy as a tool of Achieving Price Stability in the Nigerian Economy". The study therefore examined the influence of money supply Monetary Policy Variable on Consumer Price Index (CPI), the effect of interest rate Monetary Policy Target Variable on domestic private investment and impact of money supply on Gross Domestic Product Proxy for economic growth for the periods 1991 to 2007.

The research design adopted in the study is the Correlation Research Design. Economic application was used for the analysis of relevant relationships and the Ordinary Least Square [OLS] Regression Technique was employed for estimation purposes.

The estimates of relevant functions were appraised on A-Priori theoretical expectation, Statistical and Econometric grounds.

The study suggests that Monetary Policy has significant influence on the direction of aggregate prices in the economy.

Again Monetary Policy has significant nominal impact on economic growth in Nigeria. project topics   final year project topics and research materials 

However, the study shows Monetary Policy has not influenced investment through interest rate. Incidentally, the bane of Monetary Policy performance through its interest rate channel is due to the huge presence of the government in the money market for fund borrowing.

The study therefore recommends that federal government through the Central Bank of Nigeria evolve appropriate policy to discourage the government (state and otherwise) participation in the money markets as borrower among others.

TABLE OF CONTENT

Title Page

Certification

Dedication

Acknowledgement

Abstract

Table of Contents

CHAPTER ONE

INTRODUCTION

1.1 Background to the study

1.2 Statement of problems

1.3 Research Question

1.4 Objectives of Study

1.5 Significant of the study

1.6 Scope of the study

1.7 Limitations of the study

1.8 Definition of terms

References

CHAPTER TWO

Literature Review

2.1     Conceptual Reviews

2.1.1 Monetary Policy

2.1.2 Price Stability

2.2     History of Monetary Policy in Nigeria

2.2.1 Monetary Policy before 1986

2.2.2 Monetary Policy since 1986

2.3     Objectives of Monetary Policy

2.3.1 Economic Growth

2.3.2 Full Employment

2.3.3 Balance of Payment Equilibrium

2.4     Tools of Monetary Policy

2.4.1 Direct Control

2.4.1.1 Quantitative Ceilings and Bank Credit

2.4.1.2 Administered Interest and Exchange Rates

2.4.1.3 Selective Credit Control

2.4.1.2 Indirect Control/ General Quantitative Control

2.4.2.1 Open Market Operations

2.4.2.2 Discount Rate

2.4.2.3 Moral Suasion

2.4.2.4 Reserve Requirement

2.4.2.5 Special Directives

2.4.2.6 Stabilization Securities

2.4.2.7 Special Deposits

2.5     Recent Developments in Monetary Policy

2.5.1 Target of Monetary Policy

2.5.1.1 Money Supply

2.5.1.2 Bank Credits 2

2.5.1.3 Interest rate

2.5.2 Indicators of Monetary Policy

2.5.3 Lingering problem of Monetary Policy

2.5.4  Challenges of Monetary Policy

2.5.5  Expansion and Contraction of Monetary Policy

2.5.6  Contractionary Monetary Policy or Restrictionary Monetary Policy

2.6     Theoretical Review

2.6.1 The Monetarist View

2.6.2 The Keynesian Views

2.7.1 Empirical Views

2.7.2 Researcher

References

CHAPTER THREE

Research Methodology

3.0     Introduction

3.2     Research Design

3.4     Specification of Model

3.5     Estimate Technique

3.6     Evaluation Procedure

3.6.1 A-Priori Theoretical Expectation Critical

3.6.2 Statistical Criteria

CHAPTER FOUR

Presentation and Interpretation of Results

4.0     Introduction

4.1     Presentation of Data

4.2     Presentation of Model

4.3     Presentation of Results

4.4     Interpretation of Results

CHAPTER FIVE

Summary Recommendation and Conclusion

5.0     Introduction

5.1     Summary

5.2     Conclusion

5.3     Recommendation

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

The central bank (CBN) of Nigeria has the obligation to formulate and execute monetary policy to promote stability in the country. To achieve this, the governor of central bank of Nigeria is required to make proposal to the federal republic of Nigeria, through finance minister, who has the power to accept or amend such proposals.

The central bank of Nigeria (CBN) is also empowered by the two enabling laws to direct the banks and other financial institutions to carry out certain duties in pursuit of approval monetary policy. The monetary policy to be pursued is therefore detailed out in the form or guidelines to all banks and financial institutions. The guidelines are generally operated within a fiscal year; both the element could be amended in the course of the year.

Non-compliance with specific provisions in the guidelines usually attract penalty.

In general term, monetary policy refers to the combination of measures designed to regulate and control the volume, cost availability and direction of money and credit in an economy.

According to Anyanwu (1993) it is deliberate effort by monetary authorities (CBN) to control the money supply and credit condition, for the purpose of achieving certain broad economic objectives.

As Akatan (1993) observed, monetary policy in Nigeria context are economic actions of the central bank of Nigeria (CBN) that affects the availability and cost of commercial and merchant banks reserves balances and by the overall monetary and credit conditions in the economy.

An increase in the supply of money would result to an increase in demand for goods and services, which would cause rising prices or a deterioration of the balance of payments position.

On the other hand, an inadequate supply of money could induce stagnation in the economy, there by retarding growth and development.

The monetary authority however, must attempt to keep the money supply growing at a rate to ensure sustainable economy growth and maintain internal and external stability. The discretionary control of the money whether cheap or expensive is depending on the prevailing, economic conditions thrust of policies.

In other words, the aims of monetary policy are basically to control inflation, maintain a steady balance of payments position to safeguard the external value of the national currency and promote adequate and sustainable level of economy growth and development, reduce vicious cycle of poverty and maintain price stability.

1.2     Statement of the Problem

The prevailing economic problem in Nigeria were inflation, unemployment, capacity under-utilization, BOP disequilibrium, inconsistent growth level in the economy are continual, in spite of claims of regulating the economy by the relevant government authority, leaves more dust as to the efficiency of the various monetary policy measures and the competence of economic planners.

In view of the above, the economic watcher and the interested public are losing faith in the monetary policy options in Nigeria over the years.

The questions in the minds of Nigeria is whether the continued disequilibrium state in the Nigerians economy is being controlled at all or left to chance by the relevant authorities.

1.3     Research Question

The research question this study will observe are -:

·        Does the efficacy of monetary policy determine economy growth in Nigeria?

·        To what extent does monetary policy affect domestic investment in Nigeria?

·        What are the problems inhabiting the monetary policy in Nigeria.

1.4     Objectives of the Study

The broad objective of the study is the appraisal of the impact of monetary policy on price stability in the Nigeria economy. However, specifically, the objectives also intends:

·        To appraise the efficacy of monetary policy in causing economic growth in Nigeria.

·        To evaluate the implication of monetary policy on Domestic Investment (DI) in Nigeria.

·        To unearth the problems inhabiting the efficacy of monetary policy in Nigeria.

1.5     Significance of the study

The findings of the study will be relevance to the following

·        Economic Planners: The study will provide empirical evidence of growth pattern of the Nigeria economy centered by monetary policy, which is essential for policy simulation purpose.

·        Economic Watchers: Results from this research work will provide an insight about the performance of monetary policy in stimulating domestic investment in Nigeria.

·        Researchers/ Students: The results of the study will serve as a means for further inquiry in this field or related other fields.

In summary, the research study findings would also be of use to anyone who is concern about the efficacy of monetary policy on price stability, its structures and administration, and why various monetary policies have not been successful in Nigeria.

1.6     Scope of the Study

This research work examined the role of monetary policy on price stability in Nigeria. It is limited to a period ranging from 1991-2007. The study covered the performance of the economy at large; this would enhance an accurate analysis of monetary policy within the economy. Emphasis was laid on the data analysis even though reference may be made to events outside the stimulated time range but limited to the aforesaid period. The focus of the work is also on effective control of excess liquidity or cash in the economy.

1.7     Limitation of the Study

The study is limited by the contradiction surrounding the relevant data as recorded by the relevant government institutions (CBN, National Bureau of Statistics, etc) Also, the study is limited by time and cost: The rising cost of transportation, stationery, clerical work, and the short time frame for the submission of this research work, also contributed a huge limitation to this study.

1.8     Definition of Terms.

The followings are the definitions and technical terms used in the course of this study.

·        Policy Instrument: The variables, which the authorities can adjust directly in order to achieve targets. An example of such variables includes the instruments of open market operations, discount rate, bank rate etc.

·        Intermediate target: These are the variables which often serve as the purpose of being the channel through which the instruments have effect on targets. Examples are interest, money supply etc.

·        Monetary Basel High powered money: Comprises certain a liability of the central bank of Nigeria (CBN) includes the total bank reserves and currency with non-bank public. The main sources of the monetary base are net foreign assets of CBN, net claims on government claims on commercial and merchant banks and other assets (net) of the CBN.

·        Interest rates: It is also known as interest rate structure. Interest rate differs from bank to bank as it have been largely deregulated every banks has interest rates for its ordinary fixed depositors, savers as well as prime lending rate which is offered to its first class customers while a maximum lending rate charged to its other customers.

More so, there exists an inter-bank rate, which applies to very short term loan transactions among the banks themselves.

The Rediscounts rate is the minimum rate at which the CBN as set aside to lend to the merchant banks and commercial bank either in direct loans or in the form of bill rediscounting

·        Price stability: the prime objective of monetary policy in Nigeria is the moderation of interest rate. To achieve this, the price levels needs to be stabilized. The policy of price stability is as a result of fluctuations in the prices of goods which bring uncertainties and instability into the economy.

However a stable price helps in reducing inequalities of income and wealth, which brings about economic stability, eliminates cyclical fluctuations, secure social justice and permits economic welfare.

References

Ogwuma, O.T (1997), "An Effective Monetary Policy in Nation Building": (CBN

Billion, Volume 2, No.3)

Odekunle, A.A (2004), "Essential of Banking and Monetary systems in Nigeria"; (Okota, Lagos. Jaytees Publishers) pp240-229.

Fisher, LA (1976) "Monetary Policy"; London :Macmillan Publishers Ltd) pp402-410

Ayodele A.O (2008), The Nigerian Banking and Financial Environment"; (Ibadan

Immaculate Press) pp86-120.

.


TYPE IN YOUR TOPIC AND CLICK SEARCH.






RESEARCHWAP.COM

Researchwap.com is an online repository for free project topics and research materials, articles and custom writing of research works. We’re an online resource centre that provides a vast database for students to access numerous research project topics and materials. Researchwap.com guides and assist Postgraduate, Undergraduate and Final Year Students with well researched and quality project topics, topic ideas, research guides and project materials. We’re reliable and trustworthy, and we really understand what is called “time factor”, that is why we’ve simplified the process so that students can get their research projects ready on time. Our platform provides more educational services, such as hiring a writer, research analysis, and software for computer science research and we also seriously adhere to a timely delivery.

TESTIMONIES FROM OUR CLIENTS


Please feel free to carefully review some written and captured responses from our satisfied clients.

  • "Exceptionally outstanding. Highly recommend for all who wish to have effective and excellent project defence. Easily Accessable, Affordable, Effective and effective."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "I saw this website on facebook page and I did not even bother since I was in a hurry to complete my project. But I am totally amazed that when I visited the website and saw the topic I was looking for and I decided to give a try and now I have received it within an hour after ordering the material. Am grateful guys!"

    Hilary Yusuf, United States International University Africa, Nairobi, Kenya.
  • "Researchwap.com is a website I recommend to all student and researchers within and outside the country. The web owners are doing great job and I appreciate them for that. Once again, thank you very much "researchwap.com" and God bless you and your business! ."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "I love what you guys are doing, your material guided me well through my research. Thank you for helping me achieve academic success."

    Sampson, University of Nigeria, Nsukka.
  • "researchwap.com is God-sent! I got good grades in my seminar and project with the help of your service, thank you soooooo much."

    Cynthia, Akwa Ibom State University .
  • "Great User Experience, Nice flows and Superb functionalities.The app is indeed a great tech innovation for greasing the wheels of final year, research and other pedagogical related project works. A trial would definitely convince you."

    Lamilare Valentine, Kwame Nkrumah University, Kumasi, Ghana.
  • "Sorry, it was in my spam folder all along, I should have looked it up properly first. Please keep up the good work, your team is quite commited. Am grateful...I will certainly refer my friends too."

    Elizabeth, Obafemi Awolowo University
  • "Am happy the defense went well, thanks to your articles. I may not be able to express how grateful I am for all your assistance, but on my honour, I owe you guys a good number of referrals. Thank you once again."

    Ali Olanrewaju, Lagos State University.
  • "My Dear Researchwap, initially I never believed one can actually do honest business transactions with Nigerians online until i stumbled into your website. You have broken a new legacy of record as far as am concerned. Keep up the good work!"

    Willie Ekereobong, University of Port Harcourt.
  • "WOW, SO IT'S TRUE??!! I can't believe I got this quality work for just 3k...I thought it was scam ooo. I wouldn't mind if it goes for over 5k, its worth it. Thank you!"

    Theressa, Igbinedion University.
  • "I did not see my project topic on your website so I decided to call your customer care number, the attention I got was epic! I got help from the beginning to the end of my project in just 3 days, they even taught me how to defend my project and I got a 'B' at the end. Thank you so much researchwap.com, infact, I owe my graduating well today to you guys...."

    Joseph, Abia state Polytechnic.
  • "My friend told me about ResearchWap website, I doubted her until I saw her receive her full project in less than 15 miniutes, I tried mine too and got it same, right now, am telling everyone in my school about researchwap.com, no one has to suffer any more writing their project. Thank you for making life easy for me and my fellow students... Keep up the good work"

    Christiana, Landmark University .
  • "I wish I knew you guys when I wrote my first degree project, it took so much time and effort then. Now, with just a click of a button, I got my complete project in less than 15 minutes. You guys are too amazing!."

    Musa, Federal University of Technology Minna
  • "I was scared at first when I saw your website but I decided to risk my last 3k and surprisingly I got my complete project in my email box instantly. This is so nice!!!."

    Ali Obafemi, Ibrahim Badamasi Babangida University, Niger State.
  • To contribute to our success story, send us a feedback or please kindly call 2348037664978.
    Then your comment and contact will be published here also with your consent.

    Thank you for choosing researchwap.com.