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Monetary Policy and Current Account Balances in Nigeria (1981–2020)

In: COVID-19, Supply Chain, Climate Change, and Sustainable Development in Africa

Author

Listed:
  • Olaide Kafayat Mustapha-Jaji

    (Nile University of Nigeria)

  • Nargiza Alymkulova

    (Nile University of Nigeria)

Abstract

This study examined the relationship between monetary policy and current account balance in Nigeria. The study covered 1981–2020 and employed an autoregressive distributed lag estimation technique. In the study, monetary policy was proxied by domestic interest rate, money supply, and exchange rate. The results showed that money supply and domestic interest rate had an insignificant effect on current account balances while exchange rate significantly impacted current account balances. Thus, the study concluded that the impact of monetary policy on current account balance depends on the measures employed. Consequently, the study recommended the need for a prudent downward adjustment in the domestic interest rate capable of promoting investment and production in the economy. Furthermore, there is the need for appropriate devaluation of the domestic currency by the monetary authority in order to promote exports of locally produced commodities while at the same time discouraging imports of consumables with indigenous substitutes.

Suggested Citation

  • Olaide Kafayat Mustapha-Jaji & Nargiza Alymkulova, 2023. "Monetary Policy and Current Account Balances in Nigeria (1981–2020)," Springer Proceedings in Business and Economics, in: Shani D. Carter (ed.), COVID-19, Supply Chain, Climate Change, and Sustainable Development in Africa, chapter 0, pages 85-104, Springer.
    • Handle: RePEc:spr:prbchp:978-3-031-26121-3_7
    DOI: 10.1007/978-3-031-26121-3_7
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