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          The Nigeria economy has been experiencing over the years the problems of unemployment, price level instability, lack of sustainable economic growth, balance of payment disequilibrium, inability to mobilize domestic saving and unsatisfactory expansion of domestic output.  This has lead to the introduction of instruments of monetary policy to regulate the value, supply and cost of money in an economy in consonance with the level of activity in order to avoid excess or insufficient supply of money in the economy.

          The researcher is aiming at finding how far monetary policy measures have gone in stabilizing the economy of this nation, and those things that hinders its success.

          In view of this, descriptive research method will be used in  collection of data, that is collecting and analyzing information on monetary policy measures from central bank of Nigeria annual report and statement of accounts, and other secondary sources.

          However, finance and time would be limitation to this research work, but the researcher is hoping that at the end of this study, people will be educated on the importance of monetary policy measures as instrument of  economic stabilization in Nigeria


In general, monetary policy refers to the combination of measures designed to regulates the value, supply and cost of money in an economy in cognizance with the level of economic activity. An express supply of money which will result in an excess demand for goods and services will cause rising prices and or a deterioration of the balance of payments position.  On the other hand, inadequate supply of money could induce stagnation in the economy thereby referred growth and development.  Consequently, the central bank and the central monetary authority, must attempt to keep the money supply growing at an appropriate rate to ensure sustainable economic growth and to maintain internal and external stability.  The discretionary control of the money stock by the central monetary authority involves the expansion or construction of money influencing interest rates to make money cheaper or more expensive depending on the prevailing economic conditions and the channeling of money to priority sector.  In a nutshell, the aims of monetary policy are basically to control inflation, maintain a healthy balance of payments position for the country in-order to safeguard the external value of the  national currency and promote an adequate and sustainable level of economic growth and development.

This study therefore, delves into monetary policy measure with a view to elucidating their effectiveness as instruments of economic stabilization in Nigeria.




1.0            Introduction

1.1     Background of the study

1.2            Statement of the problem

1.3            Statements of objectives

1.4            Research hypothesis

1.5            Significance of the study

1.6            Scope and limitation of the study

1.7            Propositions

1.8            Definition of terms


2.0            Literature review

2.1     Definition of monetary policy

2.2            Economic stabilization

2.3            Monetary policy objectives and economic stabilization

2.4            Analysis of key policy objectives/economic indications

2.5            Techniques and instruments of monetary policy

2.6            Debt management as integral part of monetary policy

2.7            Placement of government deposits

2.8            The transmission mechanism


3.0            Research methodology

3.1     Research design

1.2            Sources of data

1.3            Data collection method

1.4            Treatment and analysis of data

1.5            Statement of null and alternatives hypothesis



4.0            Presentation, interpretation and analysis of data

4.1     Analaysis based on objectives

4.2            Hypothesis ptesting

4.3            Discussion




5.0            Summary of findings, recommendations and collusion

5.1     Summary of findings

5.2            Recommendations

5.3            Conclusion




1.0            INTRODUCTION


          Generally monetary control measure include those devices that influence the overall supply, cost and availability of money and credit.  This is the responsibility of the monetary authority which comprises the central bank and the federal government in Nigeria, the central bank exercises primary responsibilities for initiating, articulating, implementing and appraising such policies.  The banks proposal are subject to ratification by the federal government.

          Monetary policy measures are monetary management techniques put in place by the government through the central bank to control money stock that is supply of money in order to influence broad macro-economic objectives which include price stability high level of employment, sustainable economic growth and a balance of payment equilibrium. These broad objectives are achieved through the use of appropriate instruments, depending on which objective the policy formulated want to achieve and on the level of development of the economy.

          In the application of monetary policy measures as instruments of stabilization of the economy, here these instruments are determined by the nature of the problems to be solved and by the environment in which these problems exist.  There are broadly two categories of hese instrument viz, quantitative or indirect controls and selective (qualitative or direct) controls.  Indirect instruments are usually used in market based economic where the quantity of money stock can be affected through the relationship between money supply and reserve money as well as the ability of the monetary authority to influence the creation of reserves.  The reserves  and hence, money supply can be affected through the following ways:

i.                   Change in reserves deposit ratio

ii.                 Change in discount rate

iii.              Interest rate change and

iv.              Engaging in open market operation (OMO)

In an under-developed financial environment, the instruments of monetary and credit targets at desired levels.  The major direct control measures is direct interest regulation.  Hence the regulatory authorities interpose explicit limitations on dealings between borrowers and creditors.

These instruments of monetary policy are applied in the achievement of various objectives However, all such objectives are in consonance with the broad objectives of the 1st National Rolling plan (1990-1992) which are:

The consolidation of the achievement made so far in the implementation of the structural adjustment programme (SAP).  The plan is also to deal with pressing problems of inflation, unemployment, the sluggish performance of the productive sectors particularly manufacturing and the inadequate availability of foreign exchange with the aim of achieving of  non – oil export.  Other socio economic problems to be addressed by the plan include the high growth rate of population, threats to the environment and the menace of anti-social behaviour such as aimed robbery, and other junile delinquency.  These objectives viz, a highly level of employment, price stability, a sustainable level of economic growth and balance of payment equilibrium.

However, the effectiveness of monetary policy measures against which background of objective were formulated has raised serious doubts as o the continuous use of these policy measures. It is in the light of the above theoretical / background that the author wishes to carry out a study of monetary policy measures as instruments of economic stabilization.


          Over the years, so many instruments of monetary policy have been in vague not to gear-up the level of investment, but unemployment, price level  instability, lack of sustainable economic growth, balance of payment disquilibrium, inability to mobilize domestic savings and unsatisfactory expansion of domestic output.  These have consistently and persistently done severe damage to the Nigerian economy unabated.

          It is against this background that the problems of this study have been identified and they are as follows:

a.                 Are monetary policy measures effective as instruments of economic stabilization?

b.                 Have there monetary policy to achieve desired objectives and what has been the outsome?

c.                  Is the implementation of monetary policy ideal?

d.                 What factors hinder the full attainment of the monetary policy objectives?

e.                  Could there be any remedy to these problems

f.                   Are there conflicts or relationship between monetary and fiscl policy measures?



The objectives of this paper are:

i.                   To present and analyse the various moneatary objectives and isntruments for the period.

ii.                 To demonstrate the general trned in monetary policy as a tool for achieving economic stabilization in Nigeria

iii.              To ascertain the level of success of policy measures agisnat desired objectives.

iv.              To identify the factors that tend to hinder the full attainment of the derived objectives

v.                 Finally to recommend the appropriate policy measures for the achievement of specific objectives as well as recommend solutions to problems that hinder the full attainment of such objectives.



          Hypothesis are research solutions o problems, which are in essence queses or unches that are subjected to some verification or test.  By the above ascertain the researcher therefore deemed  it necessary to establish the following hypothesis, that:

1.                 An increase in money supply earns increase in the level of inflation

2.                 A reduction in money supply will lead to a current account surplus in the balance of payments.

3.                 An increase in net domestic credit will lead to an increase in GP growth rate.


          This research provides an insight into monetary policy measures as instruments of economic stabilization. It will therefore be of invaluable use to the following people.

          To students, it will provide a complement to the few existing tests on money policy and economic stabilization.

          To policy makers, this study will be of immense value because it:

i.                   Highlights the mechanism for the operation of monetary policy against achieving set goals and objectives.

ii.                 Examines the areas of conflict between monetary and fiscal policies.

iii.              Analyses the problems facing the full implementation of monetary policy measures and

iv.              Suggestive solutions to such identified problems, as such policy makers will find its recommendations invaluable in formulating new and ideal measures for the achievement of economic stability.

          Bankers will also find this work a useful tool in analyzing the effects of government actions on their activities and whether these actions are, on the whole favourable in investors are not left out, this work will serve as a guide on the effects of monetary policy on various sector of the economy, in which their funds can be invested and lastly, the ordinary reader will find this work as an eye opener and a valuable store of knowledge.

1.8            DEFINITION OF TERMS

Monetary policy:  instruments of stabilization and economic

                             development. They are measures, or a combination

                             of measures designed to influence or regulate the

                             volume, price and direction of money and credit.

Money stock:       The amount of money in circulation at any point in

                             time.  This is variable and could be affected.


Reserve money:    This is also known as reserve.  It is the amount of

                             fund a bank is required to maintain in its vaults

Reserve Radio:     This is the ratio of the deposit that the banks are

                             required to maintain with the central bank.

Discount rate;       This is the rate at which the central bank makes loans

                             to the commercial bank as a lender of final or  last


Lender of last resort: This term is used to qualify the central bank. 

                             When banks are cash strapped, it is the central banks

                             that lends to them when there is no other alternatives.


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