MONETARY POLICY AND INFLATION IN NIGERIA ECONOMY (A CASE STUDY CENTRAL BANK OF NIGERIA (CBN) KADUNA)
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MONETARY POLICY AND
INFLATION IN NIGERIA
(A CASE STUDY CENTRAL
BANK OF NIGERIA KADUNA
ABSTRACT
This research work is an attempt to examine the
role of Central Bank of Nigeria in the monetary policy and inflation of Nigeria
Economy. The research work provide a background to the origin and formation of
Monetary policy in fighting inflation and highlighted the major functions and
activities performed by the Central Bank of Nigeria in order to achieve their
main objectives.
TABLE OF CONTENTS
Title page - - - - - - -- - - - i
Declaration - - - - - - - - - ii
Approval page- - - - - - - - - - iii
Dedication - - - - - - - - - iv
Acknowledgement - - - - - - - - v
Abstract - - - - - - - - - - vi
Table of content - - - - - - - - vii
CHAPTER
ONE
1.0 Introduction - - - - - - - - 1
1.1 Background
of the Study - - - - - - 2
1.2 Statement
of the problem - - - - - - 3
1.3 Specific
Objective - - - - - - - 4
1.4 Research Hypothesis - - - - - - 5
1.5 Significance
of the study - - - - - 6
1.6 Scope and
Limitation of the study - - - - 7
1.7 Organizational
Structure of the study - - - - 8
1.8 Definition
of some key terms - - - - - 8
CHAPTER TWO
2.0 Literature review- - - - - - - - 12
2.1 Relevant Concept and theories
- - - - - 14
2.2 Definition
of Monetary Policies - - - - - 17
2.3 Definition
of inflation - - - - - - 19
2.4 Instrument
of Monetary Policies - - - - 20
2.5 Types of
Monetary policy - - - - - - 25
2.6 Expansionary
monetary policy - - -- - - 26
2.7 Contractionary
Monetary Policy - - - - - 27
2.8 Objective
of Monetary Policy - - - - - - 28
2.9 Problems
Militating against an Effective Monetary
Policy
in Nigeria
2.10 Relationship
between monetary policy and inflation - 33
2.11 Types of
Inflation - - - - - - - 34
2.12 Causes
and effects of Inflation - - - - - 35
2.13 Control
of Inflation - - - - - - - - 37
2.14 Central
Bank of Nigeria
2.15 Role of
Central Bank in process of controlling Inflation 40
2.16 Use of
Monetary Policy in control of Inflation by Central
Bank of Nigeria
2.17 Summary
and conclusion of chapter - - - - 44
CHAPTER
THREE
3.0 Research Methodology - - - - - - 46
3.1 Introduction
- - - - - - - - - 46
3.2 Method
of Data Collection - - - - - - 47
3.3 Sources of
data Collection - - - - - 47
3.4 Types of
data - - - - - - - - - 48
3.5 Method
used in data collection - --- - - - 49
3.6 Population and sample size - - - - - 49
3.7 Justification
of choice - - - - - - - 50
CHAPTER
FOUR:
4.0 Data Presentation, Analysis
and Interpretation - - 51
4.1 Introduction - - - - - - - 51
4.2 Data
Presentation - - - - - - - - 51
4.3 Techniques
used in testing hypothesis - -- - - 58
4.4 Testing
Hypothesis - - - - - -- - - 59
4.5 Research
finding and their validity - - - - 62
4.6 Summary
of findings - - - - - - - 62
4.7 Conclusion
- -- - - - - - - - 63
CHAPTER FIVE
5.0 Summary, conclusion and
recommendation - - 64
5.1 Summary of the study - - - - - - - 64
5.2 Conclusion Renark - - - - - - - 65
5.3 Policy Recommendations and suggestion for the study 65
Bibliography - - - - - - - - 68
CHAPTER ONE
1.0
INTRODUCTION
Monetary
policy entails the government policies aimed at changing the quantity of money
or credit condition. In every economy, after fiscal policy, the next most
powerful macro-economic stabilization is monetary policy.
In
fact Monetary and fiscal policies are expected to work together as complements
to achieve one goals of a sound macro economic management that include amongst
other domestic price stability external sector viability as well as enhance
efficiency in resource allocation, distribution and utilization.
Monetary
policy is therefore measure designed to regulate and control the volume, cost,
availability and direction of money and
credit in an economy to achieve some specifically micro-economic objectives. It
is one policy that seeks to influence economic activities using the tools available
to the central bank i.e. money supply (MS) interest rates and exchange rates.
It can also mean the deliberate attempt by the authorities to either control
the supply of money or to control interest rates or to ration the amount of
credit granted by banks.
1.1 HISTORICAL
BACKGROUND OF THE STUDY
The
history of economic growth shows that, economic transformation started in England Europe
and North America . Economic transformations
did not get to other parts of thee world until in the 1950s when Japan Africa . It is only South Africa Africa .
It
is against this background that this study is being undertaken. This poverty
can be tackled using both fiscal and monetary policies to help solve this problem
and growing poverty. So far, removing the country from poverty trap that seems
almost impossible to be solved using variety of macro-economic policy measures.
1.2
STATEMENT
OF THE PROBLEM
The
problem of inflation in Nigeria
The
question now is, why we still experience inflationary conditions after all
these variety of measures adopted by the government to control it or reduce it
intensity?
Moreover,
the issue of monetary policy has its objectives one of which is tackling the
problem of inflation. The Central Bank
applied all measures to control it still every effort seem to be fruitless.
The
nest question is why have all these measures failed in combating the problem of
inflation?
1.3
SPECIFIC
OBJECTIVE
I’m
specifically writing this project in partial fulfilment towards the award of
Higher National Diploma (HND) in accountancy.
Other
genera objectives of the study include the following among others:
To
provide the readers with broad knowledge of the different activities carried
out by the Central Bank of Nigeria Nigeria
Enlighten
students, readers and researchers on the significance of Central Bank of Nigeria Nigeria
To
highlight the relevance of monetary policy in combating inflation.
Try
to explain the various types of monetary policy that can be used to combat
inflation and other macro-economic problems.
Identify
and discuss the monetary policy problems with particular reference to Nigeria
To
explain the various instruments of monetary policy that can be used to combat
inflation especially in less developed Countries (LDCS) such as Nigeria
1.4
RESEARCH
HYPOTHESIS
The
following hypothesis have been put forward to guide research work
Ho1: Monetary Policy is not an effective tool of macro-economic
stabilization of an economy.
Hi1: Monetary Policy is a very effective tool of macro-economic
stabilization of an economy.
Ho2: Money supply has no impact on the Level of economic activities and
growth.
Hi2: Money supply has an impact on the level of economic activities and
rate of growth.
Ho3: Central Bank of Nigeria
Hi3: Central Bank of Nigeria
1.5
SIGNIFICANCE
OF THE STUDY
However,
this research work will assist the economy to derive possible solution to the
research problem e.g. control of inflation using monetary policy measures as adopted
by the monetary authorities of the Central Bank.
Furthermore,
the research ex-rays the various types of monetary policy measures, which can
be used to combat the problem of unstable economy and prices, and as a result
will be a kind of research materials to those in various fields may be of
immense use of future researchers.
Government
will benefit immensely from this research works as the topic is very relevant
in the field of macro-economic policy formulation.
1.6
SCOPE
AND LIMITATIONS OF THE STUDY
This
project covers the role of monetary policy and it’s controlling inflation in
the Nigeria
However,
study of this nature is known to be subject to a number of problems or
constrains, which are peculiar to the Nigerian society such as financial
constraints. This research work was not an exception the problem of visiting
the Central Bank of Nigerian and some other places for data collection involved
spending a lot of money or transport expenses.
Hence,
the predicament of the overage students can therefore be imagined.
Furthermore,
the issue of office protocols time limit, secrecy inadequate research materials
also were some setbacks to the researchers in carrying out this research.
1.7 ORGANIZATIONAL
STRUCTURE OF THE STUDY
A
Central Bank is a financial institution owned by the government of a nations
run by Board of Directors, Chaired by Governor appointed by the government and
charged with the responsibility of managing the expansion and contraction of
the volume, cost and availability of money in the interest of public welfare. It is primarily a non- profit entity
in U.S. U.K. England
1.8 DEFINITION
OF TERMS
1.
Expansionary
Monetary Policy: Is a monetary policy that seeks to
increase the size and volume of money supply, it can be increase by buy bonds
in exchange for hard currency payment to adds that amount of currency to the
money supply.
2.
Contractionary
Monetary Policy: This is the policy that can be
implemented by reducing the size and volume of monetary base by the way of sell
bonds in exchange for hard currency, by so doing it removes that amount of
currency from the economy.
3.
Reserve
Requirement: Commercial banks are required to
maintain certain reserve requirement in order to control their liquidity and
influence their credit operations, these are usually expressed as a percentage
of customers deposits.
4.
Discount
Rate: The discount rate is the rate of interest the monetary
authorities charge the commercial banks on loans extended to them. If the Central
Bank wishes to increased liquidity and investment, it reduces the discount
rate, and on the other hand if the Central Bank wishes to reduce liquidity in
economy, it raises the discount rate.
5.
Liquidity
Ration: The Central Bank imposes upon the bank a minimum
liquidity ratio, being vary to the needs of the situation. It is designed to
enhance the ability of bank to meet cash withdrawals in them by their
customers. Such liquidity ratio stands for the proportion of specified assets.
6.
Open
Market Operation (OMO): This involves the Central Bank
Discretionary power to sell or purchase securities in the financial market in
order to influence the volume of credit and interest rate which consequently
affect money supply. The securities include treasury certificates, treasury
bill and development stock
7.
Moral
Suasion: Is the act of public pronouncements or outright
appeal on the apart of monetary authorities to the banks requesting them to
operate in a particular direction for the realization of specified government
objectives.
8.
Economic
Growth: This is a process whereby the real per-capital income
of a country increases over a long period of time. Economic growth is measured
by the increase in the amount of goods services produced deposits are savings
and currents account of deposits in a commercial bank.
9.
Money
Supply: Is a currency with the public and demand deposits
with commercial banks. Demand deposits are savings and current account of
depositors in a commercial bank.
10.
Economic
Life Cycle: This refers to a view of product
design, each stages of the product’s life is assessed in terms of cost, at each
stage of this life cycle choice have to be made.
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