MONETARY POLICY AND THE PERFORMANCE OF THE NIGERIAN ECONOMY: SECTORIAL ANALYSIS (1986-2017)
ABSTRACT
The study investigated the effects of monetary policy tools in the performance of the Nigerian Economy using the outputs from six selected sectors of the economy which includes the crude petroleum and natural gas (PEGAS), Manufacturing (MANU), Construction (CONS), Trade (TRADE), Information and Communications (INFOC) and Finance and Insurance (FINS). Time serial data covering 32 years from 1986 to 2017 employed from CBN statistical bulletin. The data were subjected to Augmented Dicker Fuller stationarity test to determine the best suitable econometric tool of analyses. Thus, the Autoregressive Distributive Lag (ARDL) was used for data model estimation. It was found that: Monetary policy tools have no significant effects on the crude petroleum and natural gas outputs, both in the long and short runs; Monetary policy tools have significant effects on the manufacturing sector output in the short run only with 81% explanatory power; Monetary policy tools have no significant effects on the construction output, both in the long and short runs with insignificant explanatory power; Monetary policy tools have significant effects on the trade sector output in the long run and short run with significant explanatory power of 86%; Monetary policy tools have significant effects on the information and communication sector output, in the short run only with significant explanatory power of 90%; and that monetary policy tools have significant effects on the finance and insurance sector output in the short run, but shows evidence of long run relationship with insignificant explanatory variables. The study thus concluded that monetary policy is not a long run policy instrument. Among others, the study recommended that the CBN should employ an expansionary policy that can increase the money supply and boost outputs in the Nigerian economy, as well as employ different sets of monetary policy directives for each of the sectors in Nigeria. The study contributed to extant literature by introducing models of sectorial output and monetary policy nexus for the trade, construction, information and communication, and finance and insurance sub-sectors in Nigeria. The study has included all the three core market-based monetary policy tools such as monetary policy rates, Treasury bill rates and cash reserve requirements in an empirical investigation of monetary policies on sectorial outputs.