An appraisal of monetary policy’s influence on investment decisions in Nigeria: A study of the CBN (2000–2020)
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Background of the Study :
Monetary policy, managed by the Central Bank of Nigeria (CBN), plays a crucial role in shaping investment decisions by influencing interest rates, credit availability, and overall financial stability. Between 2000 and 2020, various monetary interventions—such as rate adjustments, reserve requirement changes, and open market operations—have been deployed to create an attractive investment environment in Nigeria (Okonkwo, 2023). These policies are intended to lower the cost of capital and promote both domestic and foreign investments. Empirical evidence suggests that stable monetary policy can significantly enhance investor confidence and stimulate investment in key sectors, thereby driving economic growth (Adeniyi, 2024). However, external shocks and policy lags may disrupt these positive outcomes, leading to uncertainty and suboptimal investment decisions (Chukwu, 2025). This study examines the impact of CBN’s monetary policies on investment decisions by analyzing financial market data, investment trends, and policy outcomes, aiming to provide actionable recommendations for optimizing monetary policy.
Statement of the Problem
Despite proactive monetary policy interventions, investment decisions in Nigeria remain uncertain, with inconsistent capital inflows and fluctuating market confidence. The gap between policy objectives and investment outcomes suggests that current monetary strategies may not be fully effective in reducing investment risk. This study seeks to identify the factors that constrain the positive impact of monetary policy on investment and to assess whether adjustments in policy formulation could enhance investor confidence and stimulate higher levels of investment (Okonkwo, 2023; Adeniyi, 2024).
Objectives of the Study:
1. To evaluate the impact of CBN monetary policies on investment decisions.
2. To identify factors that limit policy effectiveness.
3. To recommend measures for enhancing investment attractiveness.
Research Questions:
1. How do monetary policies influence investment decisions in Nigeria?
2. What are the key obstacles in achieving policy effectiveness?
3. What strategies can improve investor confidence?
Research Hypotheses:
1. H1: Stable monetary policies positively influence investment.
2. H2: Policy inconsistencies negatively affect investment decisions.
3. H3: Enhanced transparency improves investor confidence.
Significance of the Study (100 words):
This study examines the role of monetary policy in shaping investment decisions in Nigeria, providing insights that will help policymakers optimize monetary interventions to foster a stable and attractive investment climate. Improved investment is crucial for economic growth and development (Chukwu, 2025).
Scope and Limitations of the Study:
The study is limited to analyzing CBN monetary policies and investment trends from 2000–2020, with limitations due to external economic factors.
Definitions of Terms:
1. Monetary Policy: Central bank actions that regulate money supply and interest rates.
2. Investment Decisions: Choices made by investors regarding capital allocation.
3. CBN: The Central Bank of Nigeria.
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