MONETARY POLICY AND GROWTH OF MANUFACTURING SECTOR: EVIDENCE FROM NIGERIA
Abstract
This study empirically examines the impact of monetary policy on manufacturing sector growth in Nigeria using secondary data from the Central Bank of Nigeria and the World Bank for the period 2000 to 2020. In concluding the analysis, the study employs the ordinary least squares multiple regression method, along with other residual diagnostics tests, to analyze data on variables such as the monetary policy rate, treasury bill rate, cash reserve ratio, and inflation rate in Nigeria during this period. The analysis revealed that the monetary policy rate and inflation rate had a negative impact on manufacturing sector growth, while the treasury bill rate and cash reserve ratio had a positive impact. However, all variables except the treasury bill rate were statistically nonsignificant. The study concludes that the monetary policy rate is an effective tool for stimulating investments and enhancing manufacturing sector growth, while the cash reserve ratio and treasury bill rate are useful for managing investment costs. Additionally, the inflation rate strongly influences monetary policy and, in turn, manufacturing sector growth. It is recommended that the government enhance coordination between monetary and fiscal policies to maintain low and stable inflation rates.