Effectiveness of Monetary Policy in Controlling Inflation in Nigeria

Ogunjinmi Olusola.O.
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Ogunjinmi Olusola.O.: Institute of Youth Studies, Tangaza University College, Catholic University of Eastern Africa

International Journal of Research and Scientific Innovation, 2022, vol. 9, issue 2, 53-58

Abstract: This paper investigated the effectiveness of monetary policy in controlling inflation in Nigeria using secondary annual data spanning from 1981 to 2019. Specifically, the paper examines if there exist any form of relationship between monetary policy and inflation in Nigeria. Money Supply, Treasury Bills Rate, Monetary Policy Rate and Exchange Rate were the variables used in the study to check inflation. The paper employed Johansen cointegration method to check for the long run relationship between the variables. Ordinary Least Square (OLS) was adopted because of its property of Best Linear Unbiased Estimator. The Johansen co- integration test revealed the existence of long-run relationship between the variables. However, the empirical result of the OLS test showed that monetary policy rate, money supply and treasury bill rates exert influence on inflation in Nigeria. While exchange rate depreciation leads to inflationary growth. This result is consistent with the prediction of economic theory. The study therefore concluded that money supply, treasury bills rate, monetary policy and exchange rate had influence on inflation within the period under consideration and recommends that monetary authority should put in place schemes to make them more effective perhaps by offering competitive rates and the nation Nigeria shift from being a consumption driven (import) economy to production based (export) economy for the impacts of these policies to achieve desired results.

Date: 2022
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