THE EFFECTIVENESS OF MONETARY POLICY IN ACHIEVING PRICE STABILITY IN NIGERIAN ECONOMY


THE EFFECTIVENESS OF MONETARY POLICY IN ACHIEVING PRICE STABILITY IN THE NIGERIAN ECONOMY

ABSTRACT

This study is to examine the role of monetary policy in achieving price stability in Nigerian economy and the objectives are as follows; to examine the effectiveness of interest rate in achieving price stability in Nigerian economy and also to examine the effectiveness of money supply in achieving price stability.

The method applied in analyzing data for this work are based on statistical at descriptive methods of analysis. (regression analysis was used to analyses the respondents opinion. The finding is that there is significant relationship interest rate and inflation.

Finally, a review of the Nigerian experience in monetary management shows that the interventionist policy stance dominated monetary management in the first two and half decades after which an era of liberalization and deregulation of financial sector followed. Only a sustained stable macroeconomic environment and a sound vibrant financial system can propel the economy to achieve her millennium development goals.

TABLE OF CONTENTS

PAGES

Title Page

Certification

Dedication

Acknowledgement

Abstract

CHAPTER ONE

1.0    Introduction

1.1    Statement of the Problem

1.2    Aim and Objectives of the Study

1.3    Research Questions

1.4    Significance of the Study

1.6    Research Methodology

1. 6. Model Specifications

1.8    Scope of the Study

1.9    Limitation of the Study

1.10 definition of Terms

1.11 Organization of the Study References

CHAPTER TWO: LITERATURE REVIEW

2.1    Introduction

2.2    Definition of Monetary Policy

2.2.1 Objectives of the Monetary Policy

2.3    Definition of Price Stability

2.4    Definition and Determinants

2.5    Inflation

2.5.1 Causes of Inflation in Nigeria

2.5.2 Effect of Inflation on the Economy

2.5.3 Inflation Targeting a Monetary Policy Framework for

Achieving Price Stability in Nigeria

2.5.4 Components for Designing Inflation Targeting Strategy

2.5.5 Necessary Conditions for Inflation Targeting in Nigeria

2.6    Benefits of Price Stability

2.7    Shortcomings of Price Stability

2.8    Definition of Economic Growth

2.9    Effect of Monetary Policy

References

CHAPTER THREE: HISTORICAL BACKGROUND, DEVELOPMENT

AND PERFORMANCE OF THE MONETARY POLICY IN NIGERIA

3.1    History of Monetary Policy

3.2    Overview of Monetary Policy in Nigeria

3.3    Monetary Policy in Nigeria Since 2001-2010

References

CHAPTER FOUR: RESEARCH METHODOLOGY, DATA ANALYSIS AND INTERPRETATION OF RESULTS

4.0    Introduction

4.1    Research Methodology

4.1.1 Sources of Data

4.1.2 Scope of the Study

4.1.4 Model Specification

4.1.5 Estimation of the Model

4.1.6 Various Statistical Tests Used

4.2    Data Analysis

4.2.1 Regression Results for Model

4.2.2 Regression Results for Model

CHAPTER FIVE: SUMMARY, FINDING, RECOMMENDATIONS AND CONCLUSION

5.1    Summary

5.2    Findings

5.3    Recommendations

5.4    Conclusion

References

CHAPTER ONE

1.0     INTRODUCTION

Research on effectiveness of monetary policy on economic variables in Nigerian economy has for long been of interest to economist and policy makers however, studies have been carried out on certain aspects of economic variables. These studied are meager and in any case, not covering the effectiveness of monetary policy of price stability in Nigeria, which now necessitated this research work.

An issue which has occupied the minds of government for decades is the effectiveness of monetary policy in influencing price stability despite the lack of consensus among economist on how it actually works and on magnitude of its effect on the economy, there is a remarkable strong agreement that monetary policy has some measure of effect on the economy (Udegbunam 2003).

Monetary policy refers to the combination of measures designed to regulate the value, supply and cost of money in an economy, in consonance with the level of economic activity. It can be described as the art of controlling the direction and movement of monetary and credit; facilities in pursuance of stable price and economic growth In an economy (CBN, 1992).

In modern economics, the central bank is the authority with the mandate to manipulating monetary policy instruments to achieving desired macroeconomic objectives.

However, the primary objective of monetary policy cuts across the mandates of most central banks is the maintenance of price stability which is imperative to the attainment of sustainable growth is the focus of these objectives which is specified in the CBN ACT of 1958.

-        Issue of legal currency notes and coins Maintain Nigeria external reserve

-        To safeguard the international value of the legal tender currency.

-        Promoting monetary stability and a sound financial system.

-        Act as banker and financial adviser to the federal government.

-        Act as a lender of last resort.

The pursuit of price stability invariably implies the indirect pursuit of other objectives such as economic growth which can only take place under conditions of price stability and allocative efficiency of the financial markets, since inflation is generally considered as purely a monetary phenomenon with significant cost to the economy. The primary goal of monetary policy is to ensure that money supply is at a level that is consistent with the growth target of real income such that non- inflationary growth will be ensured. The pursuit of price stability through monetary policy therefore encompasses all main areas in which the Central Bank can contribute towards stabilizing the macroeconomic environment of the country.

1.1    STATEMENT OF THE PROBLEM

Central bank of Nigeria (CBN) has been the sole player in using monetary policy in achieving price stability. Central bank of Nigeria has failed to achieve price stability due to the following:

-        Lack of consensus on what constitute price stability. For example, Shiratsuka (1997) provides three definition of price stability as follows:

-        A tolerable target for inflation rate (if achieved assumes the attainment of the price stability objective)

-        Sustainable growth underprice 'stability, implying price stability is achieved at the inflation crate consistent with sustainable economic growth.

-        Stability of inflation expectation

-        Moreso, political instability has also been attributed to one of the problem confronting central bank of Nigeria (CBN) in achieving price stability through the use of monetary policy.

1.2    AIM AND OBJECTIVES OF THE STUDY

The aim of this study is to carry out an indepth assessment of the effectiveness of monetary policy in achieving price stability in Nigeria economy. To this end, this study will investigate whether monetary policy will help in achieving price stability.

The objectives of the study are as follows:

(a)     To examine the effectiveness of interest rate In achieving price stability in Nigeria economy

(b)    To examine the effectiveness of money supply In achieving price stability in Nigeria economy.

1.3    RESEARCH QUESTIONS

(i)     What will be the effectiveness of interest rate ill achieving price stability in Nigeria economy?

(ii)    Will money supply affect price stability ill Nigeria economy?

(iii)   What will be the effectiveness of interest rate and money supply in achieving price stability in Nigeria economy?

(iv)   What will be the effectiveness of interest rate and money supply in achieving price stability in Nigeria economy?

(v)    Will inflationary rate affect the economic growth of Nigeria economy?

(vi)   What will be the effectiveness of interest rate and money supply in achieving economic growth in Nigeria economy?

1.4     SIGNIFICANCE OF THE STUDY

To assess the effectiveness of monetary policy on price stability in Nigeria economy. This study will reflect the effectiveness of monetary policy towards economic growth.

The benefits to be derived from this study will assist the policy makers to fine-tune strategies regarding monetary policy, how the money should be circulated in economy. Other people that also benefits from this research work include instructors, friends and colleagues in the field of studies etc.

1.5     RESEARCH HYPOTHESIS

The research hypothesis are as follows:

Hypothesis 1

Ho:    There is no significant difference between interest rate and inflation rate.

HA:     There is significance difference between interest rate and inflation rate.

Hypothesis 2

Ho:    There is no significance difference between money supply and inflation mate.

HA:     There is significance difference between money supply and inflation rate.

Hypothesis 3

Ho:    There is no significance difference between interest rate, money supply and inflation rate.

HA:     There is significance difference between interest rate, money supply and inflation rate.

1.6     RESEARCH METHODOLOGY

The research methodology is specifically designed to carry out effectiveness of monetary policy on price stability in Nigeria economy for the past seventeen years (17 yrs): 1993-2009.

In this regard, the sources of data are basically based on secondary sources of data collections. 'These are in the form of dailies, statistical research findings such as: Central Bank of Nigeria (CBN) review etc while regression (OLS) will be used to solve the collection data. The methodology shall be descriptive and qualitative.

1.6.1 MODEL SPECIFICATIONS

Model I

Inf Rat = βo + 1 INTt + Et

INFt = Inflation Rate

Where βo - Constant

β1 = Parameter of the Equation

INTt = Interest Rate

Et = Error of Stochastic Term in Time T

1.8    SCOPE OF THE STUDY

The scope of the study shall cover the effectiveness of monetary policy in achieving price stability in Nigerian economy development during the period 1993-2009.

1.9    LIMITATION OF THE STUDY

The perceived limitations are as follows:

(a]     The possibility of getting the relevant data and the information for the purpose of the research work.

(b)     The availability of fund for the research work is another constraint.

(c)     Time constraint is another limitation as the research work is combined with the academic work in school as a final year student.

1.9    DEFINITION OF TERMS

Money: It is anything that is general acceptable as a medium of exchange, store of value.

Monetary policy: Is an instrument that Central Bank of Nigeria uses to control the circulation and money supply in an economy.

Inflation: It is persistence Increase In price of goods and services.

Stability: When there is a fixed price for particular goods and services.

1.10   ORGANIZATION OF THE STUDY

This study will be structured into five (5) chapters. Chapter one will examine the introductory aspect of the study containing the background of the study, statement of problem, aim and objectives, research questions, research hypothesis, research methodology, significance of the study, limitations of the study and organization of the study. Chapter two will contain the review of relevant literatures. Chapter three will focus on the structural analysis. Chapter four will examine the data analysis, presentation and interpretation of the results findings. Chapter five will focus on the summary, findings, recommendations and conclusion then the references.

.

THE EFFECTIVENESS OF MONETARY POLICY IN ACHIEVING PRICE STABILITY IN NIGERIAN ECONOMY



TYPE IN YOUR TOPIC AND CLICK SEARCH.






RESEARCHWAP.NET

Researchwap.net is an online repository for free project topics and research materials, articles and custom writing of research works. We’re an online resource centre that provides a vast database for students to access numerous research project topics and materials. Researchwap.net guides and assist Postgraduate, Undergraduate and Final Year Students with well researched and quality project topics, topic ideas, research guides and project materials. We’re reliable and trustworthy, and we really understand what is called “time factor”, that is why we’ve simplified the process so that students can get their research projects ready on time. Our platform provides more educational services, such as hiring a writer, research analysis, and software for computer science research and we also seriously adhere to a timely delivery.

TESTIMONIES FROM OUR CLIENTS


Please feel free to carefully review some written and captured responses from our satisfied clients.

  • "Exceptionally outstanding. Highly recommend for all who wish to have effective and excellent project defence. Easily Accessable, Affordable, Effective and effective."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "I saw this website on facebook page and I did not even bother since I was in a hurry to complete my project. But I am totally amazed that when I visited the website and saw the topic I was looking for and I decided to give a try and now I have received it within an hour after ordering the material. Am grateful guys!"

    Hilary Yusuf, United States International University Africa, Nairobi, Kenya.
  • "Researchwap.net is a website I recommend to all student and researchers within and outside the country. The web owners are doing great job and I appreciate them for that. Once again, thank you very much "researchwap.net" and God bless you and your business! ."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "Great User Experience, Nice flows and Superb functionalities.The app is indeed a great tech innovation for greasing the wheels of final year, research and other pedagogical related project works. A trial would definitely convince you."

    Lamilare Valentine, Kwame Nkrumah University, Kumasi, Ghana.
  • "I love what you guys are doing, your material guided me well through my research. Thank you for helping me achieve academic success."

    Sampson, University of Nigeria, Nsukka.
  • "researchwap.com is God-sent! I got good grades in my seminar and project with the help of your service, thank you soooooo much."

    Cynthia, Akwa Ibom State University .
  • "Sorry, it was in my spam folder all along, I should have looked it up properly first. Please keep up the good work, your team is quite commited. Am grateful...I will certainly refer my friends too."

    Elizabeth, Obafemi Awolowo University
  • "Am happy the defense went well, thanks to your articles. I may not be able to express how grateful I am for all your assistance, but on my honour, I owe you guys a good number of referrals. Thank you once again."

    Ali Olanrewaju, Lagos State University.
  • "My Dear Researchwap, initially I never believed one can actually do honest business transactions with Nigerians online until i stumbled into your website. You have broken a new legacy of record as far as am concerned. Keep up the good work!"

    Willie Ekereobong, University of Port Harcourt.
  • "WOW, SO IT'S TRUE??!! I can't believe I got this quality work for just 3k...I thought it was scam ooo. I wouldn't mind if it goes for over 5k, its worth it. Thank you!"

    Theressa, Igbinedion University.
  • "I did not see my project topic on your website so I decided to call your customer care number, the attention I got was epic! I got help from the beginning to the end of my project in just 3 days, they even taught me how to defend my project and I got a 'B' at the end. Thank you so much researchwap.com, infact, I owe my graduating well today to you guys...."

    Joseph, Abia state Polytechnic.
  • "My friend told me about ResearchWap website, I doubted her until I saw her receive her full project in less than 15 miniutes, I tried mine too and got it same, right now, am telling everyone in my school about researchwap.com, no one has to suffer any more writing their project. Thank you for making life easy for me and my fellow students... Keep up the good work"

    Christiana, Landmark University .
  • "I wish I knew you guys when I wrote my first degree project, it took so much time and effort then. Now, with just a click of a button, I got my complete project in less than 15 minutes. You guys are too amazing!."

    Musa, Federal University of Technology Minna
  • "I was scared at first when I saw your website but I decided to risk my last 3k and surprisingly I got my complete project in my email box instantly. This is so nice!!!."

    Ali Obafemi, Ibrahim Badamasi Babangida University, Niger State.
  • To contribute to our success story, send us a feedback or please kindly call 2348037664978.
    Then your comment and contact will be published here also with your consent.

    Thank you for choosing researchwap.com.