Achieving and Maintaining Price Stability in Nigeria

This paper reviews the historical performance of monetary policy in Nigeria and discusses the relative merits of alternative monetary policy strategies that Nigeria could adopt in the future, once the many operational issues that today obstruct the conduct of monetary policy have been addressed. An analysis of external and fiscal dominance in Nigeria reveals that none of the candidate strategies is particularly appealing although, on various grounds, a long-run target for inflation combined with a free float seems to be the ultimate option. The paper shows how to design and operationalize such a regime in Nigeria when account is taken for the emerging market features of the economy.Inflation targeting;Dollarization;Price stabilization;Fiscal management;inflation, monetary policy, central bank, price stability, inflation target, nominal interest rate, monetary conditions, monetary policy rules, stable prices, monetary fund, real interest rate, annual inflation, foreign exchange, inflation-targeting, price level, low inflation, inflation performance, monetary policy strategy, financial stability, monetary transmission, price inflation, monetary policy strategies, monetary regime, macroeconomic stability, nominal interest rates, monetary policy regime, inflation rate, actual inflation, aggregate demand, high inflation, rediscount rate, money market, rate of inflation, average inflation, monetary union, real output, monetary authorities, general price level, monetary policies, inflation rates, inflation stabilization, reduction of inflation, monetary financing, monetary authority, monetary aggregate, monetary regimes, discount rate, inflation dynamics, stable price, monetary policy regimes, optimal monetary policy, foreign currency, monetary policy instrument, inflation targeting regime, lower inflation, monetary instruments, real variables, inflationary shock, relative prices, monetary zone, monetary transmission mechanism, monetary aggregates, printing money, percent inflation, real rates, monetary policy rule, real rate of interest, expectations of inflation, relative price, control of inflation, rising inflation, moderate inflation, monetary policy decisions, monetary policy operations, national bank, inflationary pressures