THE ROLE OF MONETARY POLICY IN THE CONTROL OF INFLATION IN NIGERIA WITH REFERENCE TO CENTRAL BANK OF NIGERIA (CBN)
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Abstract
The monetary policy of a country deals with control of money stock (liquidity) and therefore interest rate; in order to influence such macroeconomics variables as inflation, employment, balance of payment, aggregate output in the desired direction. There is no standard and ideal structure of monetary policy target and instrument, the instrument varies from country to country, depending on the size and stage of development of the financial market.Many attempts being made by the Nigeria authorities to attain higher rate of economic growth and development have generally being accompanied by certain degree of price increase in recent years, the phenomenon developed into several and prolonged inflation and stag inflation. Indeed, it is increasingly being recognizes that a process of rapid economic growth is likely to provoke inflationary pressures. However, whether the problem of inflation in this country is due to mismanagement of monetary policy tools or structural deficiencies still remain a controversial matter. This study is aimed at determining the role central bank monetary policy play in the control of inflation in the Nigeria economy. The ordinary least square method of the classical linear regression model is the econometric technique adopted in this study which covers a period of (1994 – 2016) the preference of the use of this model is because of certain assumption underlying the classical linear regression model. Finding shows that the relationship between money supply and inflation is positive and conformed with the a priori expectation but is statistically insignificant, secondly the result indicated a positive relationship between interest rate and inflation rate which conform with the apriori expectation but is statistically insignificant. Lastly the study shows the relationship between GDP and inflation is negative which conform with the apriori expectation but is statistically insignificant.
From a broad economic viewpoint, monetary policy instrument can be regarded as mere catalysts that accentuate the pace of economic development. Their efficiency can largely depend on the economic will of the people to implement genuine decisions of the government especially concerning inflation control.
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