EFFECT OF MONETARY POLICY ON ECONOMIC PERFORMANCE OF STATE GOVERNMENTS IN SOUTH-EAST, NIGERIA 2015-2023

Abstract

This study examined the effect of monetary policy on the economic performance of state governments in Southeast Nigeria from 2015 to 2023. The research specifically analyzes how fluctuations in interest rates, exchange rates, inflation rates, and broad money supply have influenced revenue generation and infrastructural development in this region. The research was motivated by the need to understand how these macroeconomic factors influence the fiscal performance of state governments, particularly in a developing economy like Nigeria, where economic instability and fluctuating financial conditions can severely affect government operations. The population of the study was 16,395,555 which comprises the population of the five states (Anambra, Imo, Abia, Enugu and Ebonyi) in Southeast geopolitical zone. The sample size for the study was 400, and this was obtained using Taro-Yamane (1964) formula. Out of the 400 questionnaire that was distributed, 397 was properly filled and returned. A descriptive research design was adopted, utilizing both primary and secondary data. Data analysis was performed using Pearson correlation and regression analysis to test the hypotheses and determine the relationships between the macroeconomic variables and state-level fiscal outcomes. The results show that interest rate fluctuations have a significant positive effect on revenue generation; Exchange rate fluctuations also significantly influence infrastructural development. Similarly, inflation rate changes were found to significantly affect infrastructural development. Finally, broad money supply was found to significantly impact the revenue generation capacity of state governments. The study concludes that stable macroeconomic policies and effective financial management are essential for sustainable revenue generation and infrastructure development in Southeast Nigeria. It recommends that state governments must incorporate macroeconomic considerations into their fiscal and infrastructural planning to ensure stability and sustainable growth, coordinate with fiscal and monetary authorities to manage inflation, and engage with key stakeholders to mitigate the adverse impacts of macroeconomic fluctuations.