An examination of economic forecasting’s role in policymaking in Nigeria: A case study of the Central Bank of Nigeria
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Background of the Study
Economic forecasting is a vital tool for policymakers, providing insights that help shape fiscal and monetary policies. In Nigeria, the Central Bank of Nigeria (CBN) relies on sophisticated forecasting models to predict economic trends and inform policy decisions. These forecasts influence decisions on interest rates, inflation control, and overall economic stability (Chinwe, 2023). The integration of economic forecasting into policymaking is essential for anticipating economic shocks and guiding proactive measures. Over the past two decades, the CBN has developed various forecasting techniques that incorporate both domestic and global economic indicators, thus enabling a more informed policy framework (Ibrahim, 2024). Despite these advancements, uncertainties persist due to model limitations, data quality issues, and external economic volatility, which sometimes lead to suboptimal policy responses (Okoro, 2025). This study examines the role of economic forecasting in shaping policy decisions at the CBN, critically assessing the accuracy, reliability, and influence of these forecasts on key economic indicators. By combining quantitative analyses with case study approaches, the research aims to identify best practices and propose improvements that enhance the efficacy of economic forecasting in policymaking.
Statement of the Problem
Despite the critical role of economic forecasting in policymaking, the CBN faces challenges in achieving consistent accuracy and reliability. Forecasting models are often hampered by data limitations, external shocks, and methodological constraints (Chinwe, 2023). These challenges have occasionally resulted in policy decisions that fall short of expectations, impacting inflation control, growth targets, and overall economic stability (Ibrahim, 2024). The disconnect between forecasted projections and actual outcomes raises concerns about the effectiveness of current forecasting techniques. This study seeks to identify the weaknesses in existing economic forecasting models used by the CBN and to propose strategies that can enhance their predictive accuracy and policy relevance (Okoro, 2025).
Objectives of the Study
1. To assess the role of economic forecasting in CBN policymaking.
2. To identify the limitations of current forecasting models.
3. To recommend improvements to enhance forecasting accuracy and policy effectiveness.
Research Questions
1. How does economic forecasting influence policy decisions at the CBN?
2. What are the major limitations of current forecasting models?
3. How can forecasting methodologies be improved to better support policymaking?
Research Hypotheses
1. Economic forecasting significantly influences policymaking decisions.
2. Data and methodological limitations reduce the accuracy of current models.
3. Enhancements in forecasting techniques lead to more effective economic policies.
Significance of the Study (100 words)
This study is significant as it provides a critical examination of the role of economic forecasting in shaping monetary and fiscal policies at the CBN. By identifying current limitations and proposing improvements, the research offers valuable insights for policymakers and economic analysts. Enhanced forecasting accuracy can lead to more proactive and effective policy responses, ultimately contributing to greater economic stability and growth in Nigeria.
Scope and Limitations of the Study
The study is limited to evaluating the role of economic forecasting in policymaking at the CBN in Nigeria. It focuses on forecasting models and their impact on policy decisions, without extending to other financial institutions.
Definitions of Terms
• Economic Forecasting: The process of predicting future economic trends based on current and historical data.
• Policymaking: The process by which government decisions are made to address economic issues.
• Central Bank of Nigeria (CBN): The institution responsible for Nigeria’s monetary policy and economic forecasting.
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