THE IMPACT OF MONETARY POLICY ON ECONOMIC GROWTH IN NIGERIA ( 1970-2019)

Abstract

This study analyzed the impact of money supply on economic growth in Nigeria. Specifically, it assessed the impact of money supply on growth, examined the effect of interest rate on growth , and the impact of exchange rate on Nigeria`s Growth. Annual time series secondary data was used in the study. World Development Indicators (2020, and Penn World Table version 9.0 were used to compile data on real GDP, money supply, level bank reserves , interest rate, inflation, exchange rate and terms of trade. The data was analyzed using econometric methods, namely the Autoregressive Distributed Lag (ARDL) Model. The unit root test, utilizing both the Augmented Dickey-Fuller (ADF) and Phillip and Perron (PP) tests, the lag order of the ARDL models using VAR lag order selection criteria, and the bound test were all carried out. From the results of the study, it was discovered that money supply(MS) has a significant and positive relationship with real GDP in Nigeria. However, interest rate has an insignificant and positive relationship with economic growth while exchange rate was statistically significant and positively related to RGDP in Nigeria. The study concluded that the money supply of Nigeria has been instrumental in aiding economic growth in Nigeria and an increase in the level of money to the various sectors of the economy would increase the level of growth in Nigeria. It is also ascertained that exchange rate is a key indicator for balancing the money value and it also found out high interest rate increases investment, reducing spending or more money in supply