Monetary Policy and Inflation Level in Nigeria

Emeka Idika, Emmanuel Chinanuife, Monday Itua and Jeremiah Eleojo Idoko
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Emeka Idika: Department of Economics, College of Management and Social Sciences, Salem University, Lokoja, Nigeria
Emmanuel Chinanuife: Department of Economics, College of Management and Social Sciences, Salem University, Lokoja, Nigeria
Monday Itua: Department of Economics, College of Management and Social Sciences, Salem University, Lokoja, Nigeria
Jeremiah Eleojo Idoko: Department of Economics, College of Management and Social Sciences, Salem University, Lokoja, Nigeria

International Journal of Research and Innovation in Social Science, 2022, vol. 6, issue 10, 424-431

Abstract: Citizens in Nigeria are faced with continuous rise in the general price level and as a result, most families find it difficult to meet up the basic life sustaining needs. The price level in Nigeria is now a serious concern as the cost of feeding increases daily without a corresponding increase in household income. This study used time series data from the period of 1983 to 2021 to assess the impact of monetary policy on inflation in Nigeria. To ensure the stationarity of the variables in the model, the study adopted the Phillip Peron Unit root test. Based on the order of integrations, bound test approach to cointegration was used to ensure the existence of long run association among the variables in the model. An autoregressive distributed lag model is used to test the impact of monetary policy variables on inflation and on gross domestic product. The study found that monetary policy negatively affects inflation in Nigeria through liquidity ratio, money supply and exchange rate. The study therefore recommends that monetary policy instruments such as liquidity ratio, money supply and exchange rate should be used when the target is to reduce or control inflation in the country. Government should adopt loose monetary policy to stimulate aggregate purchases. With this, money supply can be increased when there is decrease in aggregate spending in an economy

Date: 2022
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