Monetary Policy Instruments and the Growth of Manufacturing Sub-Sector in Nigeria: (1981-2021)

Ojo Rufus Olawumi

Ojo Rufus Olawumi

Keywords: Broad Money Supply, Interest Rate, Exchange Rate, Manufacturing Output

Abstract

The study examined the nexus between monetary policy instruments and the growth of manufacturing sub-sector in Nigeria. It examined both the short and the long-run relationship between monetary policies and manufacturing sector in Nigeria. The study employed the time series data between 1981 and 2021. In order to achieve the objectives of the study, multiple regression model were formulated. Stationarity tests were conducted on all the series before the estimations to ensure the absence of stochastic processes. The ARDL result showed that the variables under investigation have significant impact on manufacturing sector in Nigeria in the long run as confirmed by the F-Statistics. The Durbin-Watson statistics value is 1.6 which means no autocorrelation. The findings revealed that exchange rate has a negative impact on the growth of manufacturing sub-sector in Nigeria in the long-run, Inflation in Nigeria has significant positive impact on manufacturing sector in the long run, Interest rate is positively related to the growth of manufacturing sub-sector in Nigeria in the long run and all the independent variables are simultaneously significant. Based on the findings, the study recommended among others that: monetary authority should avoid policy inconsistencies to enable long term business planning and investment by manufacturers in Nigeria, Central Bank of Nigeria should maintain a lower interest rate on loans so that manufacturers and other investors who make up the deficit unit of the economy are encouraged to borrow more when the interest rate is low thus leading to increased investment and growth of the manufacturing sector in Nigeria.

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