The impact of monetary policy instruments on real sector output in Nigeria (1981-2020)

Abstract

This study looked at how Nigeria's real sectors performed in relation to monetary policy tools. Data for the research were taken from the CBN statistics bulletin of the Central Bank of Nigeria. The enhanced Dickey Fuller and Philip-Perron unit root test was used to determine if the variables were stationary. The results of the ADF unit root test showed that the variables' orders of integration were 1(1) and 1. (0). This condition necessitates the use of the ARDL to cointegration approach in the research in order to determine the long-run connection between the variables utilising bound tests. The ARDL's findings demonstrated that the factors had a long-term association. It also demonstrates that the monetary policy tools (MPR, CRR MS, & TBR) have a short-term impact on Nigeria's real sector production (AGDP & MGDP). Therefore, the research suggests, among other things, that monetary targeting be used by the central bank (CBN) as a tool for monetary policy in order to attain some of the macroeconomic goals of price stability and full employment. In order to allow deposit money banks to provide affordable loans to investors, the monetary authority (CBN) should also evaluate the monetary policy rate and cash reserve ratio downward. Federal government should also peg the Treasury bill at a rate that is competitive enough to attract investors.