An appraisal of monetary policy’s influence on economic stability in Nigeria: A study of the CBN (2000–2020).
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Background of the study:
Monetary policy is a critical instrument for maintaining economic stability, and the Central Bank of Nigeria (CBN) has employed a variety of strategies between 2000 and 2020 to regulate liquidity, control inflation, and foster sustainable growth (Oluwaseun, 2023). The CBN’s interventions—including interest rate adjustments, reserve requirements, and open market operations—aim to balance economic growth with financial stability. These measures have helped moderate inflation and stabilize the currency while attempting to stimulate credit flow. However, external shocks, structural inefficiencies, and global market fluctuations have sometimes undermined these efforts. Recent debates focus on the adequacy of these monetary policies in addressing persistent challenges such as unemployment, currency volatility, and credit scarcity (Ekun, 2024). This study critically appraises the influence of monetary policy on economic stability in Nigeria, examining both the achievements and shortcomings of CBN strategies. It utilizes empirical data to evaluate how monetary measures have shaped economic performance and to recommend ways to enhance policy effectiveness in a rapidly changing economic environment (Ibrahim, 2025).
Statement of the problem:
Despite the CBN’s proactive measures, Nigeria continues to experience economic instability marked by inflation fluctuations, currency depreciation, and intermittent credit shortages. These issues suggest that current monetary policies may not fully address the complex dynamics of the Nigerian economy. External shocks, regulatory constraints, and structural inefficiencies further complicate the effectiveness of these strategies (Oluwaseun, 2023; Ekun, 2024). The gap between policy objectives and actual outcomes undermines investor confidence and sustainable growth. This study aims to identify the limitations of existing monetary policies and propose targeted reforms that can better align monetary interventions with the demands of a dynamic economic environment.
Objectives of the study:
- To evaluate the impact of CBN monetary policies on economic stability in Nigeria.
- To identify challenges associated with current monetary strategies.
- To recommend policy reforms to enhance economic stability.
Research questions:
- How do CBN monetary policies influence economic stability in Nigeria?
- What challenges undermine the effectiveness of these policies?
- What policy reforms can improve economic stability?
Research Hypotheses:
- CBN monetary policies have a positive effect on economic stability.
- External shocks and structural inefficiencies negatively impact monetary policy effectiveness.
- Policy reforms can lead to improved economic stability.
Significance of the study:
This study is significant as it critically examines the role of monetary policy in ensuring economic stability in Nigeria. By evaluating CBN strategies, the research provides essential insights into how monetary interventions can mitigate economic volatility. The findings will assist policymakers in refining approaches to manage inflation, stabilize currency values, and promote sustainable growth, thereby contributing to a more resilient economic framework (Ekun, 2024).
Scope and limitations of the study:
This study is limited to evaluating the influence of monetary policy on economic stability in Nigeria, focusing on strategies implemented by the CBN.
Definitions of terms:
- Monetary Policy: The process by which a central bank controls the money supply and interest rates.
- Economic Stability: A state in which an economy experiences steady growth and low inflation.
- Central Bank Strategies: Policy measures implemented by a central bank to regulate economic activity.
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