IMPACT OF MONETARY POLICY ON ECONOMIC DEVELOPMENT IN NIGERIA

Monetary policy remains a critical instrument for achieving macroeconomic stability and fostering economic development in Nigeria, where persistent inflation, exchange rate volatility and fluctuating growth have continued despite successive policy reforms. This study examines the impact of monetary policy on economic development in Nigeria, with specific focus on the Monetary Policy Rate, broad money supply and inflation over the period 2015–2025. An ex post facto research design was adopted using annual secondary data sourced from the Central Bank of Nigeria, National Bureau of Statistics and World Bank. Ordinary Least Squares regression, supported by descriptive statistics, unit root, cointegration and diagnostic tests, was employed, with real gross domestic product as the proxy for economic development. Empirical findings reveal that the Monetary Policy Rate exerted a negative and statistically significant effect on real GDP, with a coefficient of −0.85, indicating that higher interest rates constrained investment and output. Broad money supply showed a positive and significant effect, with a coefficient of 0.0021, confirming the growth-enhancing role of liquidity expansion. Inflation negatively affected economic development, with a coefficient of −0.65, reflecting its destabilizing influence. The model explained about 78 percent of variations in economic development, while Johansen cointegration results confirmed a stable long-run relationship among variables. The study concludes that monetary policy significantly influences Nigeria’s economic development, although its effectiveness is weakened by inflationary pressures and structural rigidities, underscoring the need for coordinated, development-oriented monetary and macroeconomic reforms. These findings provide empirical guidance for policymakers seeking sustainable growth, price stability, improved investment climate, and stronger monetary transmission mechanisms.