EFFECT OF MONETARY POLICY ON MANUFACTURING OUTPUTS IN NIGERIA: 1980-2024

Abstract

The Study examined the Impact of Monetary policy on the manufacturing outputs in Nigeria: 1980-2024. AugmentedDickey-Fuller(ADF)wasemployedtotestforthestationarityofthe variables under study. The result of the unit root test revealed that manufacturing outputs, interest rate (IR) and inflation rate (INF) are Stationary at level, while Money supply (MS) and monetary policy rate (MPR) were stationary at first difference. The study also employed Autoregressive Distributed Lag (ARDL) model as an estimation technique to ascertain the long run and short run relationship between the dependent variable and independent variables. In the long run, the ARDL estimation revealed that interest rate and money supply had positive and significant impact on the manufacturing outputs in Nigeria, while monetary policy rate and inflation rate impacted negatively and insignificantly on the manufacturing outputs in Nigeria. In the short run, ARDL estimation shows that interest rate at lags one to four had negative but significant impact on the manufacturing outputs in Nigeria, while money supply and monetary policy rate had a negative but significant impact on the manufacturing outputs in Nigeria during the period under review. The study recommendations that Central Bank of Nigeria and other key stakeholders should embark on appropriate policies aimed at mopping up the excess money supply in circulation as such measures will control inflation and boost manufacturing sector output in Nigeria.

Keywords: Monetary Policy, Monetary policy rate, Augmented Dickey-Fuller, Autoregressive Distributed Lag, Manufacturing sector Output and Nigeria