EFFECT OF MONETARY POLICY ON MANUFACTURING SECTOR GROWTH IN NIGERIA

JULIE OROBOSA1 ASEMOTA, CHRISTOPHER CHIGOSIMUZO AGUNOBI

Abstract


This study empirically examined the effect of monetary policy on the manufacturing sector growth in Nigeria. The paper adopted an ex-post facto design and the paper used Autoregressive Distributed Lag Model (ARDL) for the estimation of the effect of monetary policy on manufacturing sector output in Nigeria. The ARDL was employed because the variables were integrated at 1(0) and 1(1). ARDL results revealed that the broad money supply has a positive and significant impact on the manufacturing sector output in Nigeria. On the other hand, the lending rate has a negative and insignificant impact on the manufacturing sector output in Nigeria while the inflation rate has a positive and insignificant impact on the manufacturing sector output in Nigeria. Therefore, it recommended that the Central Bank of Nigeria should design a mechanism for the effective maintenance of a broad money supply to increase the manufacturing sector output in Nigeria. Also, the Central Bank of Nigeria should design a mechanism to reduce the lending rate to a single figure to encourage the MSMEs for increased manufacturing sector output in Nigeria. Finally, the Central Bank of Nigeria should also reduce the interest rate in Nigeria to increase the rate of investment for sustainable manufacturing sector development in Nigeria.

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