Monetary Policy Instruments, Price Stability: Nigeria Perspective

Over the years, the banking sector in Nigeria has come up with different activities and policies to check relative economic stability and better the economy. With the introduction of monetary policy, it is expected that monetary stability and a sound financial system would be achieved. Thus, this study examined the impact of monetary policy instruments in achieving price stability in Nigeria for the period 2015-2019. Monetary policy was proxied by monetary policy rate (MPR) and money supply (M2) while Price stability was proxied by consumer price index (CPI). Autoregressive Distributed Lag model (ARDL) was employed to analyze the data in order to determine the “individual impacts of independent variable on the dependent variable. Findings showed that monetary policy rate (MPR) and Money supply (M2) had positive and significant impact on consumer price index (CPI) in Nigeria. However, the study showed that “individual impact of Monetary Policy Rate (t=2.753) and Broad money (t=6.686445) on Consumer Price Index in Nigeria were more significant than that of speed adjustment of CPI to MPR and M2 with positive co-efficient. (0.002414).The study concluded that monetary policy instruments have a significant impact on price stability in Nigeria. The researcher recommended, that well - structured monetary policy instruments like open market operation (OMO), Liquidity ratio, cash reserve ratio and the likes can be used to achieve price stability. Ammonizing of monetary and Fiscal authorities, licensing of non-interest banks by CBN should be considered in order to achieve effective result