MONETARY POLICY AND ECONOMIC PERFORMANCE IN NIGERIA

AN INDUSTRIAL SECTOR ANALYSIS

Abstract

This paper examined the nexus between monetary policy and economic performance in
Nigeria from the stand point of industrial sector from 1990 - 2022. The industrial sector
is vital to the growth of any economy as it has reflected in the economic performance of
the Asian Tigers. The significance of this paper is that it addressed vital elements of
industrial sector performance which other works have not examined. The dependent
variables for this study were industrial employment rate (INE) and industrial growth rate
(IDG) while the independent variables were cash reserve ratio, liquidity ratio, exchange
rate, broad money supply, treasury bill, and monetary policy rate. The Autoregressive
Distribution Lag (ARDL) was employed and the results indicated that on the part of the
industrial sector growth rate, Cash Reserve Ratio (CRR), Exchange Rate (EXR), inflation
Rate (INF), Liquidity Rate (LR) and Broad Money Supply (BMS) all have negative impact
but EXR and INF are statistically significant. However, Monetary Policy Rate (MPR) and
Log of Treasury Bill (LOGTRB) have positive effect on industrial sector growth rate but
they are not statistically significant. On the other hand, the findings from the industrial
sector employment rate showed that INF, LR, BMS and LOGTRB are inversely related to
the employment capacity of industrial sector but not statistically significant. CRR, EXR
and MPR have positive effect on the sector’s employment rate with CRR and MPR being
statistically significant. The only independent variable that has a positive effect on both
dependent variables is MPR. This indicates that monetary policy rate is the only vital tool
that can enhance the economic performance through IDG and INE. This study
recommended the use of MPR to navigate the economy through the industrial sector.