©ARC Page | 65 An Empirical Investigation of the Relationship between Money Supply and Inflation in Nigeria (1970-2011)

Abstract: This paper attempts to empirically investigate the long-run causal relationship between money supply and inflation in Nigeria within the period 1970 to 2011. Employing a multivariate co-integration regression technique, the study reveals that: there exists a long run relationship between money supply and inflation in Nigeria; there is no causality between money supply and inflation in Nigeria; real broad money supply at lag 1 has a negative and significant influence on inflation rate in Nigeria. The study recommends that s monetary policies, instruments and institutions should be improved and strengthened to effectively manage the money stock and maintain it at acceptable and non-inflationary levels