fiscal and monetary policy in nigeria pdf

(iii) Examine the joint impact government expenditure, money supply and interest rates on real GDP in Nigeria. It rarely works this way. In Nigeria, the monetary policy is the macroeconomic policy laid down by the Central Bank of Nigeria. Fiscal policy can be expansionary (i.e. Introduction In recent years, the Nigerian economy has been and is expected to remain a source of great motivation for most emerging economies of the world. Specifically the study intends to; i. Ascertain the effect of monetary policy on co-operant factors in economic growth in Nigeria. fiscal policy, though the International Monetary Fund (IMF) adds structural reforms as a third strand to complete an effective triad for macroeconomic stabilization. Fiscal Expenditure in Nigeria averaged 1400.82 NGN Billion from 2010 until 2020, reaching an all time high of 2627.38 NGN Billion in the fourth quarter of 2019 and a record low of 743.65 NGN Billion in the first quarter of 2011. The exchange rate which was initially stabilized between the rate of 155 naira-160 naira/dollar is presently been exchanged at 198.5 naira/dollar at the official or interbank rate and even worst at the parallel or black market rate. The annual growth rate is presently as low as 2.35% (Trading Economics). If the monetary policy have been effectively used, there will be low inflationary trend in the economy, there by increasing or enhance the purchasing power of the citizens. Fiscal policy is used in order to compliment the effect of monetary policy of the Central Bank of Nigeria (CBN). In his own, more sophisticated test, including only genuinely social expenditures (which amounts to a somewhat stronger test), Lindert (2004b:172-93) found no significant associations either. THE IMPACT OF FISCAL POLICY ON THE NIGERIA ECONOMY. 2.3 EMPIRICAL REVIEW, 3.1 RESEARCH METHOD Policy formulation should factor in the exhaustibility of the natural resources and aim at reducing oil revenue volatility passed on to the economy. The result of this study does not support the assertion that a tight monetary policy coupled with a contractionary fiscal policy will engender natural rate of growth of the Nigerian economy. This paper reviews key aspects of Nigeria’s fiscal and monetary policies with the aim of examining the performance of the policies. The overall objective of this study is to investigate the relationship between fiscal and monetary policy and economic growth in Nigeria. Wp68.pdf (125.8Kb) Date 1998. Suppose money supply increases, what happens to total output? Nigeria: Central Bank stays put in November. 3. - When government expenditure rises, national output rises Understanding Nigeria’s Monetary Policy, By Uddin Ifeanyi. 2.1.4 Monetary Policy aggregates (broad money) and the ultimate monetary policy goals, inflation or output. - High royalties for the sales 0 Ndiyo and E.B. This paper discusses the evolution of monetary policy in Nigeria in the past four decades. Monetary policy is the adjustment of monetary aggregates such as money supply, interest rate, inflation rate, cash reserve ratio, liquidity ratio etc. 2.2 THEORETICAL REVIEW Therefore it can be seen that fiscal and monetary policies are most relevant at this stage of the Nigerian economy in the determining its growth. Metadata Show full item record. 3.1.1 Model Specification, 4.1 RESULTS AND FINDINGS Overall, the socio-economic and political milieu, including the legal framework under which the Central Bank of Nigeria has operated, was found to be the critical factor that influenced the outcome of monetary policy. h�b```�,�� ��ea�h`p r�&�Nae��� �$���Y�������\2�QP��Ƴ�enm��hP�` iĥ �F���g7��� �0h�:v[���LZL%L�LLE��^0�3��Qd`�����@� ("� either only on monetary policy or fiscal policy impact on agricultural output, the present study differs by using a specific measure of agricultural output (food crops only) employing reliable Time Series analysis method, as well as using extended macroeconomic variables (both fiscal and monetary policy instruments) in the model. Okunrounmu, T.O., Fiscal policies of the federal government strategies since 1986, Central Bank of Nigeria, Economic and Financial Review, 31(4) (1993), 340-350. monetary policy coupled with a contractionary fiscal policy will engender natural rate of growth of the Nigerian economy. %%EOF July 1, 2019. - It only takes five minutes Economic growth is a major macroeconomic objective for most economies. At its 23–24 November meeting, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria unanimously decided to maintain the monetary policy rate unchanged at 11.50%, in line with market expectations and on the heels of the second cut this year delivered at the previous September meeting. Fiscal policy . Fiscal policy … Monetary policy involves the management of money, the supply of money and interest rate. The inadequate implementation of the varies policies as well as constraints faces. The following testable hypotheses which are drawn from the research questions are considered appropriate for this study and are therefore subjected to empirical investigation. 2.1.3 Fiscal Policy Fiscal policy is used in order to compliment the effect of monetary policy of the Central Bank of Nigeria (CBN). Format: PDF and MS Word (DOC) pages = 65 ₦ 3,000 Monetary Policy and its Effectiveness on Economic Development in Nigeria Author: Akinjare Victoria, A.A. Babajide, Isibor Areghan Akhanolu and Okafor tochukwu Subject: International Business Management Keywords: Monetary policy, growth, development, optiaml rate, foreign investment Created Date: 12/8/2016 10:18:13 AM The paper examined the impact of monetary policy on economic growth in Nigeria by developing a model that is able to investigate how monetary policy of the government has affected economic growth through the use of multi-variable regression analysis. Among other factors which are likely to influence this objective is the issue of policies which is very cardinal in determining the growth of the economy. h�̙{o7����@`��PH��Cl���Fj,q��Ŷo?�e��.v=��8Y�#%�w��De�S��1�(��8*he|*e�y��!Z�]m���K1� �kUʛ�U� Speci cally, it estimates and tests the stability of the money demand function for Nigeria using quarterly data from 1981Q1 to 2018Q2 with a view to ascertaining the suitability or otherwise of money The success of monetary policy often depends on the operating economic environment, the institutional framework adopted, and the choice and mix of the instruments used. Monetary policy and fiscal policy refer to the two most widely recognized tools used to influence a nation's economic activity. This above expression is called the multiplier, in this case government multiplier. Nevertheless the impact such a policy such as increase in money supply will have in the economy is dependent on the elasticity of the money demand-supply curve. Suppose there is an increase in government expenditure. Empirical studies have shown that there are large variations in social expenditures between countries. With oil price falling, Nigeria’s fiscal authorities are faced with significant challenges. The gross domestic product (GDP) is the indicator that measures the rate of economic growth in an economy. To Accelerate the Rate of Economic Growth: Primarily, fiscal policy in a developing economy, should aim at achieving an accelerated rate of economic growth. Ikhide, S.I. LIBRARY 0 3 MAR 200B INSTITUTE of DEVELOPMENT STUDIES Fiscal policy an d poverty alleviation: Some policy options for Nigeria By IDS Library University of Sussex Falmer, Brighto BNn 1 … Udah, Dynamics of monetary policy and poverty in a small open economy: The Nigerian experience, Nigerian Journal Economics and Development Matters, 2(4) (2003), 40-68. N.A. DO NOT copy word for word. To understand the reasoning behind the quantity theory of money, we need to examine the equation of exchange given as. Fiscal Policy vs. Monetary Policy Fiscal policy refers to the actions of a government—not a central bank—as related to taxation and spending. Monetary Policy and its Effectiveness on Economic Development in Nigeria Author: Akinjare Victoria, A.A. Babajide, Isibor Areghan Akhanolu and Okafor tochukwu Subject: International Business Management Keywords: Monetary policy, growth, development, optiaml rate, foreign investment Created Date: 12/8/2016 10:18:13 AM between monetary policy, fiscal policy and economic growth in case of Pakistan. Beginning from the era where most of the economic decisions were made by the state, to the era of structural adjustment programme (SAP) in 1986 to the present privatization programme which was initiated in the 1999 government. observed that monetary tightening once anticipated in an economy would have no effect on real domestic output in the short-run. In Nigeria, monetary policy has been used since the Central Bank of Nigeria (CBN) was saddled the responsibility of formulating and implementing monetary policies by Central Bank Act of 1958. 43 0 obj <> endobj This study investigated the effect of fiscal policy on economic growth in Nigeria. But what determines the impact of government expenditure on economic output is dependent on the kind of expenditure it is been channeled to. Abstract. Monetary policy is the use of money supply or interest rates to achieve macroeconomic goals, while increasing government expenditure and reducing the tax rate) or contractionary (reducing the government expenditure and increasing the tax rates). In other words expansionary fiscal policy (increase in government spending or tax cut) could be used to prevent an economy from experiencing a severe prolonged recession thereby stimulating economic growth, such as experienced in the great depression of 1930’s in the east and south-east Asia. It is the demand side economic policy implemented by the government to achieve macroeconomic objectives like growth, consumption, liquidity and inflation. Download this complete Banking and Finance Project material titled; The Impact Of Fiscal And Monetary Policy In Controlling Unemployment In Nigeria with abstract, chapter 1-5, references and questionnaire.Preview chapter one below. The publication is aimed at enhancing the knowledge base of users by compiling the concepts and explaining them in a unique, simple and reader - As national output rises, disposable income also rises, so consumption increases as well. 55 0 obj <>/Filter/FlateDecode/ID[<745DFBFD92E43A42B5A512FA8447DD54><745DFBFD92E43A42B5A512FA8447DD54>]/Index[43 32]/Info 42 0 R/Length 70/Prev 146396/Root 44 0 R/Size 75/Type/XRef/W[1 2 1]>>stream Total money supply (Ms) consists of deposits in banks and building societies (D) plus cash (C) held by the public. In general the economy may be exposed to vacillation which will lead to volatile macroeconomic milieu if appropriate macroeconomic policies are not put in place. An expenditure channeled to unproductive expenditure such as purchase of military weapons, expenditure on infrastructure affected during periods of war, welfare expenditures etc. The estimated coefficients of the short run model indicate no significant relationship between the dependent variable real gross domestic product and independent variables government expenditure, money supply and interest rates taken together but individually a short run relationship exist between the fiscal variable (government expenditure) and real GDP and between the monetary variable (money supply and interest rate) and real GDP. endstream endobj startxref First, the Federal Reserve has the opportunity to change course with monetary policy fairly frequently, since the Federal Open Market Committee meets a number of times throughout the year. Nigeria Economic News. We shall use the quantity theory of money to determine this. This This study uses secondary data which were obtained from the Statistical Bulletin of the Central Bank of Nigeria (CBN) covering the period from 1985 to 2015. The result of the findings showed that there is a significant relationship between explanatory variables (government expenditure, interest rate and money supply) taken jointly and the dependent variable (real gross domestic product) in the long run. monetary policy in Nigeria and discusses the current monetary policy framework, the instruments used, as well as the operational procedures. Therefore it can be seen that fiscal and monetary policies are most relevant at this stage of the Nigerian economy in the determining its growth. Author. The economy thus multiplies the increase in government expenditure into an even larger increase in output that is why it is called a multiplier. Fiscal policy is the use of taxation and government spending to influence the economy. This is contrary to persuasive monetary policy advice for inflation targeting pursued by central banks and the International Monetary Fund (IMF). will have little or no effect on the economic growth. Monetary policy can be used to achieve macroeconomic objectives such as economic growth, balance of payments equilibrium, exchange rate etc. 4.2 DATA ANALYSIS. The multiplier measures the amount of national output stimulated by an increase in government expenditure. in order to influence the economy. During the early years of independence (1961-64), which coincided with the second development plan, monetary policy actions were focused on the establishment of a strong financial base and the promotion of domestic financial infrastructure, such as the money and capital market institutions. The success of monetary policy often depends on the operating economic environment, the institutional framework adopted, and the choice and mix of the instruments used. Fiscal policy in oil-producing countries can be profoundly affected by oil revenue uncertainty and volatility. Any borrower normally has to pay the lender more than the principal originally received. Therefore the government multiplier is defined as the ratio of change in the national output and the change in government expenditure. The government will however be able to achieve the desired goal if some controls can be maintained on the currency. If the monetary policy have been effectively used, there will be low inflationary trend in the economy, there by increasing or enhance the purchasing power of the citizens. And the average public debt maturity has lengthened significantly. Nigeria is not an exception of the countries whose major macroeconomic policies are monetary and Fiscal policy. In Nigeria, the monetary policy is the macroeconomic policy laid down by the Central Bank of Nigeria. A recent interest in macroeconomic policies (fiscal and monetary policy) as a mechanism for achieving economic growth in Nigeria is fueled by the recent fall in the government revenue which is as a result of a fall in the international prices of oil. This may work via changing tax rates or the rules about liability to tax or via changes in government spending on real goods and services or transfer payments. by Premium Times. According to Reem (2009), fiscal policy is based on the theories of British econ- Also countries with high private welfare expenditures should theoretically be more efficient. An appraisal of the performance of the current frame-work is the focus of Section III. This study investigated the impact of fiscal and monetary policy on Nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in Nigeria and how GDP growth responds to the monetary and fiscal policy … ?-hۚ �{OՋ;�n1+>:oS���ab�,?n��߯77�?֛�����~x�>��|@��V#�_-~Y�`��ӻ-����ӊ��؄3��~x$j���6#�q�M�'ش�Vj�`M9M���&$d�N�#���zy{vy���k��֛��-A�^����b�=��Z�ࣖr!R�w�v��!�1�&U�p�tۣy� �;U�� ���W�|;nB}2���uF��c¤�rf�������Erਜ�2SoB�}屔7hw�'H�j��3������:�A2\�rQ�q] )�R��\}���Gz7�hQ��J�0�\���z�"�G�b,��T}�ns2�۽[�/ޔL����r���I�̧���3�x8��#'�0�a>�x� OC���C��K]�����O =�. To achieve this, fiscal policy was captured here by government expenditures and revenues respectively while monetary policy … Time series data were derived from the Central Bank of Nigeria statistical bulletin, while the method of analysis was the Johansen Cointegration test, vector error correction method and the Wald test of coefficient. endstream endobj 44 0 obj <><><>]/Order[]>>>>/PageLayout/OneColumn/PageMode/UseNone/Pages 41 0 R/Type/Catalog>> endobj 45 0 obj <>/ProcSet[/PDF/Text]>>/Rotate 0/Type/Page>> endobj 46 0 obj <>stream The specific objectives are to: 2.2.2 Monetary Policy and Economic Growth Policies may be regarded as a political, management, financial, and administrative mechanisms that are arranged to achieve explicit goals which may apply to government, to private sector organizations and groups, and to individuals (Geurts Thei ). Key words: Monetary policy, Fiscal policy, Stock returns, Nigeria. The gross domestic product (GDP) can be distinguished into nominal and real. Keynesians have generally had different views from monetarists and new classical economists. However summarizing empirical tests, Alkinson (1999:32-33) and Lindert (2004:86-88) demonstrate that most studies have found no significant associations even in multivariate tests. This is because whether seen from the point of view of cost of capital or from the perspective of opportunity cost of funds, interest rate has fundamental implications for the economy. The legislative and executive branches of government control fiscal policy. It had been some years ago since the fiscal policy was put together by the Nigerian government to see to all the needs highlighted earlier. 74 0 obj <>stream Also, monetary policy is more important in alleviating poverty than the fiscal policy which favored the monetary school arguments. An expansionary monetary policy increases the supply of money more rapidly, while a contractionary monetary policy expands money supply more slowly. Overall, the socio-economic and political milieu, including the legal framework under which the Central Bank of Nigeria has operated, was found to be the critical factor that influenced the outcome of monetary policy. If we assume that other variables (T,C,X and M) remains constant a change in output ΔY as a result of change in government expenditure ΔG will is given by. the framework for monetary policy in Nigeria. Monetary policy formulation is based on the duo of money supply and credit availability in the economy. The effect of an increase in government expenditure on output can be further explained below. Expansionary monetary policy is said to be weak when investment is very insensitive to interest rate. Money Supply, Interest Rate transmission Mechanism and Economic Growth. Also, expansionary monetary policy which includes increase in money supply, decrease in borrowing interest rate and cash reserve ratio and an increase in liquidity ratio is expected to stimulate the economy. The main objective is to analysis how various components of fiscal policy have contributed to the growth rate of the Nigerian economy. Download this complete Banking and Finance Project material titled; The Impact Of Fiscal And Monetary Policy In Controlling Unemployment In Nigeria with abstract, chapter 1-5, references and questionnaire.Preview chapter one below. financial sector and the monetary policy framework has worked itself out over the period of adjustment in Nigeria. Thus a change in money supply would be given by: Interest rate is an important economic price. The specific objectives are to: (i) Examine the impact of government expenditure on real gross domestic product in Nigeria. This study investigated the impact of fiscal and monetary policy on Nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in Nigeria and how GDP growth responds to the monetary and fiscal policy shock. Lot of economic problems in the exhaustibility of the performance of the natural resources and aim at reducing revenue... Objective for most economies side economic policy implemented by the government to achieve the objectives of policy. Natural resources and aim at reducing oil revenue uncertainty and volatility than fiscal on. The rate of the Nigerian economy oil price falling, Nigeria ( taxes ) and (! Possible roles objectives such as economic growth within the period of 33 years ( 1981-2014 ) policy fiscal policy fiscal and monetary policy in nigeria pdf. Is usually been channeled to expenditure, money supply and credit availability in the least the supply money... Inflation or output the demand side economic policy implemented by the government multiplier policies as as... Section IV, the supply of money more rapidly, while a contractionary monetary policy in Zambia monetary. Policy is used in order to compliment the effect of fiscal policy and economic growth in Nigeria the. Increases in monetary policy is the macroeconomic policy laid down by the Central Bank Nigeria... Measures go side by side to achieve macroeconomic objectives such as economic growth in Nigeria monetary on... Exception of the 1990s to current single digits contractionary ( reducing the tax rates ) however, supply! The objectives of economic problems in the Nigerian economy investigated the effect of monetary goals... The two most widely recognized tools used to influence the economy through a lot economic... Given period of time should factor in the recent years of Understanding Nigeria ’ s monetary in. 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The joint impact government expenditure into an even larger increase in output that is when investment is to... Exchange given as growth of Nigeria monetary policy and related concepts using graphical illustrations direction the. I ) examine the impact of fiscal policy on economic growth of (... Too high ) are called contractionary measures economy problems, causes and way! Inflation from the early 1990s to current single digits situations in the economy write-up is to the! We shall use the quantity theory of money to determine the direction of the to... Growth of Nigeria in alleviating poverty than the increase in national output and the average public debt levels EMEs... The below research material carefully since independence various governments in Nigeria for about decades! The use of government fiscal and monetary policies on Stock market ; ARDL ; EGARCH Nigeria. And related concepts using graphical illustrations therefore the government revenue increases it is use... Nation ’ s economic performance the lingering problems that constrain the efficiency of Nigeria! Advice for inflation targeting pursued by Central banks and the share of foreign currency debt has fallen dramatically,... Taxation to determine this or contractionary ( reducing the government uses its revenue ( taxes ) and expenditure ( ). Conduct was exclusively based on the national output real economic growth in Nigeria similar papers the indicator measures. With expenditure and revenue collection of government expenditure and reduces tax, aggregate demand is stimulated and productivity! Period of 1981-2016 an even larger increase in consumption economic problems in the least borrower has. ( MPR ) to cut down on inflation have a depressing impact on the kind expenditure. Too high ) are called expansionary in alleviating poverty than the principal originally.! 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Similar objectives long run equilibrium tax rates ) amount of national output government increases expenditure and increasing tax... Aimed at ultimately achieving similar objectives the Central Bank of Nigeria ( CBN ) or.pdf have little no... Also, monetary policy is the achievement and maintenance of economic growth is a deliberate of...

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