THE EFFECTIVENESS OF MONETARY POLICY AS A TOOLS FOR CONTROLLING INFLATION IN NIGERIA (1980-2004)
This study is designed to empirically analyze the effectiveness of monetary policy as a tool for controlling inflation in Nigeria.
To investigate on this, hypothesis were formulated as follows:
Ho: Monetary policy measures adopted over the years have no significant impact in inflation control in Nigeria.
Hi: monetary policy measures adopted over the years have significant impact on inflation control in Nigeria.
The researcher adopted the method of linear regression, the ordinary least square (OLS) technique in analyzing the secondary data of inflation rate and money supply (1980-2004). The researcher were further subjected to t-ratio and f-tests, the result of which confirmed.
I. Monetary policy measures adopted by the monetary authorities between 1980 and 2004 were not effective and had no significant impact in controlling inflation.
2. Quick monetary remedies for inflation control do not exist.
Based on the above findings, the following are the policy recommended:
The elimination of inflation requires the eradication of inflationary expectation.
Government should concentrate more on productive investment, which will reduce inflationary pressure in Nigeria.
The monetary authorities should maintain vigilance in its efforts to keep inflation in check by adhering to effective monetary and fiscal policies.
Government should monitor the implementation of monetary policies to ensure its success.
It is believed that if the monetary authorities follows the above recommendation, effective will be achieved.
1.1 BACKGROUND OF THE STUDY
Nigeria still presents a clear reflection of the third world economy in which the growing economy has some working machinery, monetary and fiscal policies that aimed towards maintaining a balance in the entire economy so that growth and development, which is the ultimate goal of every economy, is realized.
Generally, monetary policy refers to combination of measures designed to regulate the values, supply and cost of money in an economy in consonance with the level of economic activity. Monetary policy is a deliberate effort by the monetary authorities to control its monetary supply and credit conditions for the purpose of achieving certain broad economic goals. The aims of monetary policy are basically to control the inflation, maintain a healthy balance of payment positions for the country in order to safeguard the external value of the national currency.