Effect of Monetary Policy in Nigeria

Topics: Monetary policy, Inflation, Central bank Pages: 20 (5948 words) Published: March 20, 2012
TABLE OF CONTENTS

CHAPTER ONE: INTRODUCTION
1.1 Background of the study
1.2 Statement of the problem
1.3 Objectives of the study
1.4 Research Question
1.5 Research Hypothesis
1.6 Significance of the study
1.7 Scope of the study
1.8 Organization of the study
1.9 Definition of terms.

CHAPTER TWO: LITERATURE REVIEW
2.1 Theoretical framework
2.2 Concept of monetary policy
2.3 Instrument of monetary policy
2.4 Monetary policy and inflation control
2.5 Problems associated with inflation control

CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design
3.2 Sources of data collection
3.3 Method of Data collection
3.4 Technique of Data Analysis
3.5 Model specification

CHAPTER FOUR: DATA PRESENTATION, DESIGN, ANALYSIS AND DISCUSSION OF FINDINGS 4.1 Data presentation
4.2 Analysis of data
4.3 Test of hypothesis
4.4 Discussion of findings
CHAPTER FIVE: SUMMARY OF FINDING, CONCLUSION AND RECOMMENDATIONS. 5.1 Summary of findings
5.2 Conclusion
5.3 Recommendation
References

CHAPTER ONE
INTRODUCTION
1.1BACKGROUND OF THE STUDY
Monetary policy in Nigeria over the past three decades has intended to attain price and exchange rate stability. Despite the apparent continuity in this objective, Nigeria’s inflation experience since 1970 has been mix. The oil boom of the 1970s according to Olubusoye and Oyaromde (2008) engendered by the Middle East crisis raised the revenue accruing to government from this non-renewable resource by or remarkable level. Government expenditures gathered momentum in the wake of the determination of the authorities to accelerate post-war reconstruction and development as envisaged in second National Development Plan. This time, however, the engine of finance became the massive oil revenues which have been singularly significant since 1973. The rapid growth in domestic money supply exacerbated by the monetization of the earnings from oil exerted upward pressure on the general price level.

The weak economic base became problematic from the early 1980s with the persistence of both internal and external disequilibrium. The collapse of oil prices in the world market triggered a series of developments in the Nigerian economy. Among the main factors responsible for inflationary pressures during the SAP era was the wholesale depreciation of the naira on the foreign exchange market which increased the naira prices of imported goods-including raw materials and capital goods as well as unprecedented growth in money supply during this period. Other factors which predisposed the Nigerian economy to inflationary pressured during the SAP era are undoubtedly related slow growth in output in both the agricultural and manufacturing sections; with particular reference to manufacturing slow output growth has been attributed to the relatively small size of the sector and its over-dependence on imports. Akinimnifest (1979).

According to Ewa and Agu (1989) The Nigerian economy has suffered series of setbacks as a result of inflation which began during and after civil war (that is 1967 to 1970). From then, the prices of goods and services have been rising steadily. The increase has become the concern of the Nigerian people and government. Rising prices of goods and services have continued to be a leading topic of discourse amongst Nigerians especially the effects of rising prices on their standard of living. Over the years the level of money supply has been rising the potential role of money in the inflationary process is not in doubt because persistent increase in money stock leads to sustained increase in price level. An optimum monetary growth would lead to positive interest rates as well as stable exchange rate, increased savings, investment and output, thus reducing inflation.

In view of this, the government in conjunction with the...

References: INTEREST RATE: Uchendu, (1993) sees it as the rice for money, paid by those who purchase money. These interest rates vary with the term of loan with credit worthiness of the borrower.
BANK CREDIT: Salu, R.A. (1983) defined it as facilities offered by the banking system to borrowers (both in private and public sectors).
MONEY: Is a temporary abode of purchasing power which separates the act of sale from that of purchase. (Chicago school led by Friedman) money is a medium of exchange and the standard unit in prices and debts are expressed. Samuelson and Wood, (1980).
DEMAND: Meluin and Boyes (2010) define demand as a relationship between two variables, price and quantity demanded, with all other factors that could affect demand being held constant.
SUPPLY: Mankin, (1998) sees supply as the amount of some product producers are willing and able to sell at a given price, all other factors being held constant.
Under monetarism, money supply is the target of monetary policy. (Nzotta 1999).
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