THE IMPACT OF MONETARY POLICY ON ECONOMIC GROWTH IN NIGERIA.

ABSTRACT This study examines the impact of monetary policy on economic growth in Nigeria, focusing on key macroeconomic indicators such as Gross Domestic Product (GDP), Inflation Rate (INF), Exchange Rate (EXCH), Interest Rate (INT), and Money Supply (M2) from 2000 to 2023. Using the Autoregressive Distributed Lag (ARDL) model, Johansen cointegration test, and Vector Error Correction Model (VECM), the research investigates both short-term and long-term relationships between monetary policy instruments and economic growth. The findings reveal that while the short- term impact of monetary policy variables on GDP growth is insignificant, there is a long-run equilibrium relationship between them. Specifically, inflation has a negative long-term effect on economic growth, while interest rates show a positive long-term influence. Additionally, the money supply demonstrates a negative relationship with GDP, suggesting that uncontrolled liquidity may hinder sustainable growth. Based on these results, the study recommends that Nigeria's Central Bank focus on managing inflation and exchange rate stability, while coordinating monetary policies with fiscal measures to ensure balanced and sustained economic growth.