MONETARY POLICY AND THE INFLATIONARY PROCESS: THE NIGERIAN EXPERIENCE, 1970 - 1993
MONETARY POLICY AND THE INFLATIONARY PROCESS: THE NIGERIAN EXPERIENCE, 1970 - 1993
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Date
1997
Authors
DAUDA, BULUS,
YUSUF
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Abstract
ABSTRACT
The course of economic history the world over is
replete with substantial price disturbance. The concept
commonly used to describe negative price disturbances in
the form of upward movement of prices is inflation. The
immeasureable attention accorded the problem of inflation
can best be understood in its ability to alter social
progress.
Attempt at arresting the inlfationary situation in
Nigeria dates back to the late 1960s following the civil
war and its attendant consequences. Ever since then, the
problem of upward price pressure has continued unabated (in
relative terms) notwithstanding its monetary explanation
and the various liquidity restraining strategies employed.
The framework within which monetary authorities design and
implement actions necessary to bring the monetary situation
under its control is the monetary policy and inflation
viewed to a very large extend as a monetary phenomenum have
over the years been addressed via monetary policy.
Monetary policy actions which involves not only
measures designed to regulate the volume but also the cost
and direction of money supply in the economy have not
yielded the required results. What seems to be happening
is that the polices designed over the years have not been
able to mainatin a close track with developments in the
financial sector and the associated intricacies of
liquidity. Developments such as the liquidity disposition
of non-bank financial institutions, domestic monetisation
of foreign savings by individuals especially over the
eleven (11) years of political transition and the extra
government budgetary expenditure that has characterised the
nations budgeting system are cases in view.
The results emanating from the empirical test as
informed by the analytical frawmework and the
specifications arrived at proved the significance of the
variables captured in the model. For instance, the quasimoney
variable used here as a surrogate proved to be
significant. This means we can inferentially conclude that
the inflow of financial resources in the eleven (11) years
of political transition has been contributory in
facilitating money inflation. Also, the growth in
domestic credit, a larger proportion of which is usually
brought about by government deficit proved significant, and
the fact that the major component of the monetary base is
credit to the banking (commercial and Merchant) sector,
activities in the non-bank financial sub-sector have proved
to be providing a counter working effect on efforts towards
inflation moderation.
It is the position of this study that the non-success
of the policy actions taken can be associated with the
considerable incoherence and inconsistency inherent in them
and policy oversight on, not ncessariily economic, policy
actions of government that have possible monetary
implications. Thus, while there is the need to exercise
restraints on unwarranted monetary expansion, especially
within the realm of the public sector, a major economic
challenge of the future is for the monetary authorities to
understand the role monetary policy has played and should
play in influencing the behaviour of important economic
magnitudes and the restructuring of the economy in general.
Description
Department of Economics
Faculty of Arts and social sciences
Ahmadu Beilo University, Zaria
Keywords
MONETARY,, POLICY,, INFLATIONARY,, PROCESS:, NIGERIAN,, EXPERIENCE,, 1970 - 1993