By Dada Adefolami
Government recognizing the economic challenges that Nigeria faces and the need for urgent action developed this as a blueprint for recovery in the short term, and a strategy for sustained growth and development in the long term. Designed as a four-year (2017 – 2020) plan, the vision of the ERGP is one of sustained inclusive growth.
The general objective of this study is to examine the impact of monetary policy on Nigeria ‘s economic growth. The specific objectives include: To determine the effect of monetary policy on the Nigerian economic growth; To ascertain the long- run relationship between monetary policy and economic growth in Nigeria
An economic recovery is the phase of the business cycle following a recession, during which an economy regains and exceeds peak employment and output levels achieved prior to downturn. A recovery period is typically characterized by abnormally high levels of growth in real gross domestic product, employment and corporate profits.
The Central Bank of Nigeria is the Central bank and apex monetary authority of Nigeria established by the CBN Act of 1958 and commenced operations on July 1, 1959. The major regulatory objectives of the bank as stated in the CBN Act are to: maintain the external reserves of the country, promote monetary stability and a sound financial environment, and to act as a banker of last resort and financial adviser to the federal government.
The central bank’s role as lender of last resort and adviser to the federal government has sometimes pushed it into murky regulatory waters. the bank followed the government’s desire and took a determined effort to supplement any short falls in credit allocations to the real sector. The bank soon became involved in lending directly to consumers, contravening its original intention to work through commercial banks in activities involving consumer lending. However, the policy was an offspring of the indigenization policy at the time. Nevertheless, the government through the central bank has been actively involved in building the nation’s money and equity centers, forming securities regulatory board and introducing treasury instruments into the capital market.
Nigeria has taken a hit from the slump in oil prices, impaired crude production and inadequate macroeconomic policy interventions, all of which resulted in harsh economic conditions for most of 2016 and have led to its current recession.
Among other government authorities in the trenches, the Central Bank of Nigeria (CBN) has played a critical role in the last year in managing some of the exposures by implementing monetary and quasi-fiscal policies – some of which have been untraditional and unprecedented.
The challenges faced and lessons learned for the journey ahead.
To understand the impact of the June 2016 foreign exchange (FX) policy, there’s a need, , to understand the enormity of the problems that stressed the FX markets and the economy before it was.
The fall in oil prices that began in 2014 exposed the vulnerabilities of the Nigerian economy – the structural imbalances and the lopsided dependence on imported goods. With the rising demand and falling supply of FX, exchange market pressure built up quickly, FX reserves diminished and the exchange rate mechanism weakened. It very quickly became harder to satisfy legitimate demand in the market, even as the bank struggled to eliminate unscrupulous demand. As a result, a backlog of more than US$4.2bn in unsatisfied demand accumulated, despite the exchange rate depreciating from NGN155:US$1 to NGN197:US$1.
With the new FX policy, have been able to liberalize and improve market efficiency. also, to clear the US$4.2bn backlog in FX demand through a combination of spot and forward sales. The exchange rates have semi- stabilized and are converging downwards, FX reserves have begun to rise, although slowly, speculators have been largely uprooted from the market and investors’, see confidence has returned significantly.
To further the gains from this policy, the bank established the investor and exporters ‘FX window’ in April 2017; this has facilitated market-driven transactions and catered for investors’ and exporters’ FX needs. It has also helped the FX supply by improving market transparency, and the convergence and stability of rates. the smooth and transparent operations of this ‘window’ had contributed to an inflow of over US$2.5bn since it was introduced.
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