IMPACT OF MONEY SUPPLY ON THE ECONOMIC GROWTH OF NIGERIA

THE IMPACT OF MONEY SUPPLY ON THE ECONOMIC GROWTH OF NIGERIA CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY In the critical observation of the recent Nigerian economic position, there has been a great divergence between the rate at which money is supplied and the exact impact it has on the general price level, which results in inflation and deflation on one hand, and the output growth (productivity) on the other hand. Although, it had occurred to our mind that Nigerian monetary policy continues to aim at achieving single digit inflation, a stable Naira, increase in domestic production and a stock of foreign exchange reserves equivalent of at least six months of current imports, the Central Bank of Nigeria (CBN)†¦show more content†¦Otherwise, we had found the repeated cases in which people seem to have so little money that they were unable or certainly reluctant to buy everything that could be produced. As a result, price fell, profits vanished, production shrank and unemployment spread. We had also found frequent examples of the opposite situation, w here the inflation spiral in which the quality of money outruns the supply of goods and people would lose through being outbid in the market place. The whole mystery is centered on the fact that commercial bank credit is a major factor contributing to the increased quantity of money in circulation in the Nigerian economy. But since the total stock of money determines the economy level to an optional, the monetary policy target is to bring the economy back to a desired optimum, but the extent to which it achieves that, is however another issue. The popular notion is that most monetary policies had failed in Nigeria due to wrong implementation of the policies or due to the uncooperative attitude of the banks before the consolidation of banks in Nigerian economy in January, 2001. Therefore, in discussing the concept of money supply and its impacts, two other issues often come to our mind namely, the state of inflationary pressure and the unemployment rate. According to the monetari st â€Å"inflation is everywhere a monetary phenomenon.† Their view was that increase in money supply in an economy,Show MoreRelatedThe Effect Of Macroeconomic Indicators On Economic Growth On A Petrol Dollar Economy Essay1391 Words   |  6 PagesTHE EFFECT OF MACROECONOMIC INDICATORS ON ECONOMIC GROWTH IN A PETROL-DOLLAR ECONOMY: THE NIGERIAN EXPERIENCE 1. Introduction The Central Bank of Nigeria Act of 1958(CBN) vested the monetary policy powers of economic stability on the apex regulatory bank (CBN).Since our independence in 1960,CBN has operated a fixed exchange regime which was at various times was at par with the British pounds and later the United States Dollar. 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