Monetary stability and economic growth in Nigeria.

Abstract

The challenge of maintaining stable monetary growth has been a difficult one the world over, due, among other things, to the often uneasy trade-offs involved. In the case of large number of developing countries, the task has been made complex by institutional weaknesses in the financial system, the volatility of the external sector, and the perennial and relatively large fiscal deficits of the government. Due mainly to these factors, efforts to control the money stock in Nigeria over the years has met with limited success. The paper points out that the long-term effect of money stock changes on output is generously considered to be tenuous. Long-term growth is generally considered to depend on real factors such as resource endowments, technology, high productivity and inter-temporal choices between present and future consumption. It therefore follows that an appropriate target for monetary expansion forms an essential part of any package of macroeconomic policy measures. It is broadly this awareness of the importance of monetary growth and short-term economic activity which informs the Central Bank's annual monetary and credit targets.