Monetary Policy and Economic Development in Nigeria

Abstract

The study examined the impact of monetary policy on economic development in Nigeria from 1986 to 2023. The independent variables were money supply, exchange rate, private sector loans, inflation rate, and gross domestic product, while the dependent variable was Gross Fixed Capital Formation. To understand short-term variable interactions, the study employed ordinary least squares model as estimated technique, the result revealed that all factors except gross domestic product had a significant influence on gross fixed capital production during the time period under investigation. However, money supply, and private sector loans were negatively related with Gross fixed capital formation, Also, exchange rate, inflation, and gross domestic product were positively related with gross fixed capital formation in the short run and concluded that monetary policy indicators did not affect Nigeria's economic development in the short run. The study recommended that Nigeria maintain an advantageous exchange rate to attract international investment; to prevent inflation and boost economic development, the government should manage money supply and exchange rates. Finally, government monetary authorities should execute more policies.