Monetary Policy Measure as Instruments of Economic Stabilization in Nigeria

Monetary Policy Measure as Instruments of Economic Stabilization in Nigeria

ABSTRACT

In general, monetary policy refers to the combination of measures designed to regulate the value, supply, and cost of money in an economy in cognizance of the level of economic activity. An express supply of money which will result in an excess demand for goods and services will cause rising prices and or deterioration of the balance of payments position. On the other hand, inadequate supply of money could induce stagnation in the economy thereby referred to as growth and development. Consequently, the central bank and the central monetary authority must attempt to keep the money supply growing at an appropriate rate to ensure sustainable economic growth and to maintain internal and external stability. The discretionary control of the money stock by the central monetary authority involves the expansion or construction of money influencing interest rates to make money cheaper or more expensive depending on the prevailing economic conditions and the channeling of money to the priority sector. In a nutshell, the aims of monetary policy are basically to control inflation, maintain a healthy balance of payments position for the country to safeguard the external value of the national currency, and promote an adequate and sustainable level of economic growth and development.

This study, therefore, delves into monetary policy measures to elucidate their effectiveness as instruments of economic stabilization in Nigeria.

TABLE OF CONTENTS

Title

Certification

Dedication

Acknowledgment

Abstract

List of tables

List of chart

CHAPTER ONE

1.0 Introduction

1.1 Background of the study

1.2 Statement of the problem

1.3 Statements of objectives

1.4 Research hypothesis

1.5 Significance of the study

1.6 Scope and limitation of the study

1.7 Propositions

1.8 Definition of terms

CHAPTER TWO

2.0 Literature review

2.1 Definition of monetary policy

2.2 Economic stabilization

2.3 Monetary policy objectives and economic stabilization

2.4 Analysis of key policy objectives/economic indications

2.5 Techniques and instruments of monetary policy

2.6 Debt management as an integral part of monetary policy

2.7 Placement of government deposits

2.8 The transmission mechanism

CHAPTER THREE

3.0 Research methodology

3.1 Research design

1.2 Sources of data

1.3 Data collection method

1.4 Treatment and analysis of data

1.5 Statement of null and alternatives hypothesis

CHAPTER FOUR

4.0 Presentation, interpretation, and analysis of data

4.1 Analysis based on objectives

4.2 Hypothesis testing

4.3 Discussion

CHAPTER FIVE

5.0 Summary of findings, recommendations, and collusion

5.1 Summary of findings

5.2 Recommendations

5.3 Conclusion

Reference

Bibliography

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Generally, monetary control measures include those devices that influence the overall supply, cost, and availability of money and credit. This is the responsibility of the monetary authority which comprises the central bank and the federal government in Nigeria, the central bank exercises primary responsibilities for initiating, articulating, implementing, and appraising such policies. The bank’s proposals are subject to ratification by the federal government.

Monetary policy measures are monetary management techniques put in place by the government through the central bank to control money stock that is supply of money to influence broad macro-economic objectives which include price stability high level of employment, sustainable economic growth, and a balance of payment equilibrium. These broad objectives are achieved through the use of appropriate instruments, depending on which objective the policy formulated wants to achieve and on the level of development of the economy.
In the application of monetary policy measures as instruments of stabilization of the economy, here these instruments are determined by the nature of the problems to be solved and by the environment in which these problems exist. There are broadly two categories of this instrument viz, quantitative or indirect controls and selective (qualitative or direct) controls. Indirect instruments are usually used in market-based economic where the quantity of money stock can be effected through the relationship between money supply and reserve money as well as the ability of the monetary authority to influence the creation of reserves. The reserves and hence, the money supply can be effected through the following ways:

i. Change in reserves deposit ratio

ii. Change in the discount rate

iii. Interest rate change and

iv. Engaging in open market operation (OMO)

In an under-developed financial environment, the instruments of monetary and credit targets are at desired levels. The major direct control measure is direct interest regulation. Hence the regulatory authorities interpose explicit limitations on dealings between borrowers and creditors.

These instruments of monetary policy are applied in the achievement of various objectives. However, all such objectives align with the broad objectives of the 1st National Rolling plan (1990-1992) which are:

REFERENCES

Ahmed A “Indirect monetary Control in Nigeria Problem and prospects’ being a speech delivered at the annual dinner of the chartered institute of bankers of Nigeria on 2nd December 1991 and published on CBN bullion volume 16 No1January March 1992

Anyato M “Public finance is a developing economy’ the Nigeria case B and F publication UHJNEC 1996

Chief B. Falegan redesigning Nigeria’s financial system university press Ltd Ibadan 1987

Odozi V.A “Current monetary and banking policies in Nigeria and prospects in the third republic” La paper presented at a seminar organized by the Nigerian economic society Lagos chapter on 5th December 1992

Ojo M.O “ problem of monetary management in Nigeria and prospects under a deregulated financial environment’ A paper presented at the national conference Pm financial system and Nigeria economic recovery organized by the department of economic Ahmadu Bello university Zaria on 7th June 1993.

Oko B. A “ The Origin development and prospect of government securities trade my in Nigeria” CBN economic and financial review vol. 30 No 2 June 1999