IMPACT OF MONETARY POLICY ON PRICE STABILITY IN NIGERIA (1993-2023)
Abstract
ABSRTACT
Price stability is a fundamental objective of monetary policy, as it fosters economic stability, enhances investment confidence, and ensures sustainable economic growth. However, Nigeria has experienced persistent inflation and price volatility over the past three decades, with inflation rates fluctuating significantly. Despite the Central Bank of Nigeria’s (CBN) efforts to achieve price stability through various monetary policy tools, inflation control remains a major challenge. This study examines the impact of monetary policy on price stability in Nigeria from 1993 to 2023, focusing on five key monetary policy variables: Monetary Policy Rate (MPR), Treasury Bill Rate (TBR), Exchange Rate (EXG), and Broad Money Supply (LM3),. The study employs an empirical approach to analyze the relationship between these monetary policy instruments and inflation, identifying trends, structural challenges, and the influence of external shocks. Existing literature suggests that factors such as exchange rate volatility, excessive money supply, and fiscal indiscipline weaken the effectiveness of monetary policy in achieving price stability. Furthermore, Nigeria’s dependency on oil revenues makes the economy highly vulnerable to external shocks, further complicating monetary policy implementation. Findings from this study are expected to provide a comprehensive understanding of the long-term effectiveness of monetary policy in Nigeria and offer policy recommendations to enhance the CBN’s ability to achieve and maintain price stability. By addressing structural challenges and refining policy measures, this research aims to contribute to the formulation of more effective monetary policies that support sustainable economic growth in Nigeria
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