The Efficacy of Nigeria Monetary Policy: A Comparative Analysis

Abstract

This study assesses the efficacy of the Nigeria’s monetary policy against the backdrop of single digit inflation monetary policy target of the regulatory authorities. Two related questions were constructed to guide the study. Relying on both the Keynesian and Structuralist analyses, data were harvested on inflationary performance for 24 years on Nigeria economy from the World Bank data base and assessed it against achievement of the targeted single digit inflation. Thereafter Nigeria inflationary performance was compared with that of South Africa another leading African economy. It was realized that inflationary pressure on the South African economy was lower than that of Nigeria, even when both countries faced high inflation episodes during the early decade of 1990s. Findings which confirm the structuralist’s argument revealed that factors beyond the purview of monetary policy constrained the realization of single digit inflation. These include the existence of various and uncontrolled sources of liquidity in the country, government fiscal operation, which include financing of deficit budget and monetization of deficits, the existence of large informal credit markets, among others. Based on this, we recommend for concerted improvement of public infrastructure, the perfection of cashless economy programme, effective prosecution of war against corruption, and the creation of a single treasury account to help close leakages especially those linked to revenue accruable to government through MDAs and remittance to States and MDAs, among others.