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Investigating the Role of Policy Rate and Money Supply in Nigeria's Inflation Stability

Author

Listed:
  • Bello Dalhatu

    (Monetary Policy Department, Central Bank of Nigeria, Abuja, Nigeria)

  • Ebuh Godday Uwawunkonye

    (Monetary Policy Department, Central Bank of Nigeria, Abuja, Nigeria)

  • Umemezia Bernice Adaeze

    (Monetary Policy Department, Central Bank of Nigeria, Abuja, Nigeria)

Abstract

This study examines the factors influencing inflation stability in Nigeria from 2011Q1 to 2023Q1. We employ an ARDL model to assess the impact of monetary policy rate, money supply, crude oil price, GDP growth, and government budget deficit on inflation. Our findings reveal that broad money and fiscal deficit exert a positive and statistically significant influence on inflation in both the short and long run. Interestingly, monetary policy rate only affects inflation in the short term. These results suggest that Nigerian policymakers should prioritize managing broad money and fiscal deficits to achieve long-term inflation stability.

Suggested Citation

  • Bello Dalhatu & Ebuh Godday Uwawunkonye & Umemezia Bernice Adaeze, 2024. "Investigating the Role of Policy Rate and Money Supply in Nigeria's Inflation Stability," Financial Economics Letters, Anser Press, vol. 3(3), pages 52-61, September.
    • Handle: RePEc:bba:j00007:v:3:y:2024:i:3:p:52-61:d:367
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    References listed on IDEAS

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    2. Mohammed A. Abango & Hadrat Yusif & Adam Issifu, 2019. "Monetary Aggregates Targeting, Inflation Targeting and Inflation Stabilization in Ghana," African Development Review, African Development Bank, vol. 31(4), pages 448-461, December.
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