EFFECTS OF MONEY SUPPLY ON ECONOMIC GROWTH IN NIGERIA (1981-2019)
Sylvanus N. AMADI(PhD)1; Christian Gbarawae NWIKINA (PhD)2 &
Ledum Moses GBARATO (PhD Scholar)3
1Head, Department of Economics, Ignatius Ajuru University of Education, Port Harcourt, Nigeria.
2Department of General Studies, School of Foundation Studies, Kenule Beeson Saro-Wiwa Polytechnic, P.M.B. 20 Bori, Rivers State, Nigeria.
3Department of Finance & Banking, Faculty of Management Science, University of Port Harcourt, Nigeria
Corresponding Author: Gbarato, Ledum M.; Email: firstname.lastname@example.org;
Phone No. +2348063104473
This study examines the effects of money supply on economic growth in Nigeria. Time series data on the subject from 1981-2019 were collected from Central Bank of Nigeria. The unit root test was carried out and the variables found to be stationary at first difference. The Johansen cointegration shows that there exist a long-run relationship between money supply and Gross Domestic Product (GDP) in Nigeria. The Error Correction Model results show that while broad money supply has a positive but marginal effect on GDP, interest rate exhibits negative but significant relationship with GDP. Also, the pairwise granger causality result reveals the presence of unidirectional causality between money supply and economic growth, with causality flowing from gross domestic product to broad money supply. The study concludes that interest rate is an efficient instrument of monetary policy capable of determining the quantum of money supply in the economy. Therefore, it is recommended that the interest rate policy of the Central bank of Nigeria should be relaxed, as that has a significant bearing on the rate of investment, which in turn is a prime mover of economic growth. Thus, if interest rate is kept moderate and stable in the short run, it will stimulate economic activities and ultimately lead to economic growth.
Key Words: Broad Money Supply, Interest Rate, Gross Domestic Product, Nigeria
AMADI, S.N; NWIKINA, C.G & GBARATO, L.M (2022). Effects of Money Supply on Economic Growth in Nigeria (1981-2019). African Journal of Business and Economic Development, 2(1), pp14-25. Available online at: https://www.ijaar.org/articles/ajbed/v2n1/ajbed-v2n1-Jan22-p2199.pdf.
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