THE COVID-19 PANDEMIC AND IMPLICATIONS FOR MONETARY POLICY IN NIGERIA: A SIMULATION STUDY

Samuel O. Olofin, Adebayo M. Adebiyi, Afees Salisu, Olusanya E. Olubusoye and Adeniyi O. Adenuga
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Samuel O. Olofin: Centre for Econometric and Allied Research, University of Ibadan, Ibadan, Nigeria
Adebayo M. Adebiyi: ��Research Department, Central Bank of Nigeria, Abuja, Nigeria
Olusanya E. Olubusoye: Centre for Econometric and Allied Research, University of Ibadan, Ibadan, Nigeria
Adeniyi O. Adenuga: ��Research Department, Central Bank of Nigeria, Abuja, Nigeria

The Singapore Economic Review (SER), 2024, vol. 69, issue 02, 591-618

Abstract: This study complements the emerging literature on the COVID-19 pandemic and provides direction, in the case of Nigeria, for targeting monetary policy response to mitigate the pandemic’s economic consequences. We simulate three scenarios: (i) do-nothing; (ii) reduce MPR gradually and (iii) reduce MPR drastically; amidst falling oil prices. The do-nothing scenario, although inflationary, would produce a marginal appreciation of the Naira/USD exchange rate. Gradual or drastic reduction of MPR would deliver relative price stability, but will undermine exchange rate stability and deplete external reserves. MPR should optimally not be reduced below 12% in response to the economic effect of the pandemic.

Keywords: COVID-19; monetary policy; modeling; Nigeria (search for similar items in EconPapers)
JEL-codes: E17 E52 I19 O55 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S0217590821410046

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