ABSTRACT
This research wok, treated monetary and fiscal
policies as efficient tolls for economic stability. This research work was done
to examine the monetary and fiscal policies and ascertain how effective they
have been in making the poor conditions of the rural area fair, to ascertain
why there should be poor unemployment in the economy despite the existence and
fiscal policies and to identify the country’s economic problems with a view to
offer lasting solution ot them. The method for sourcing data used in this
research work, was primary and secondary data. Primary data includes:
questionnaires comprising statement drawn from research, questionnaires
formulated and oral interview while secondary data includes the use of
textbooks, journals, internet. Findings and annual reports. The analysis of
data was done using numerical and percentage techniques a d tables were also
used to test the response. The method used in testing the research questions is
the use of statistical method like percentage from the analysis, it revealed
that there are major policies which the government and monetary authorities
must endavour to maintain and apply appropriately. Useful recommendations are
made based on the findings from the study, that government and monetary
authorities should endeavour to mountain and apply these efficient tools. And
when policy measures are well implemented, there will be great improvement in
the economy of the country.
TABLE OF CONTENTS
Title page
Approval page
Dedication
Acknowledgement
Abstract
Table of contents
CHAPTER ONE:
1.0 Introduction
1.1
Background of the study
1.2
Statement of problem
1.3
Purpose / objective of the study
1.4
Research Questions
1.5
Significance of the study
1.6
Scope of the study
1.7
Limitations of the study
1.8
Definition of operational terms
CHAPTER TWO:
2.0 Review of
Related Literature
2.1
Preamble / Introduction
2.2
Definition of monetary policy
2.3
Monetary and fiscal policies differentiated
2.4
Objectives of monetary policy
2.5
Objectives of fiscal policy
2.6
Tools / instrument of monetary policy
2.7
Theoretical framework tool / instrument of fiscal
policy
2.8
Monetary and Fiscal policies in the Nigeria Economy
2.9
Monetary and Fiscal policies as efficient tools of
Economic Development
CHAPTER THREE:
3.0 Research Methodology
3.1 Research Design
3.2 Area
of the study
3.3 Population
of the study
3.4 Sample
and sampling techniques
3.5 Instrument
for data collection
3.6 Description
of instruments used
3.7 Validation
and Reliability of Instrument
3.8 Distribution
and Retrieval of the instrument
3.9 Method
of data Analysis
CHAPTER FOUR:
4.0
Data presentation and Analysis
CHAPTER FIVE:
5.0 SUMMARY, CONCLUSION AND RECOMMENDATION
5.1
Summary of the Findings
5.2
Conclusion
5.3
Recommendation
References
Appendix A
Appendix B
Questionnaires
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND
OF THE STUDY:
The
need for the monetary and fiscal policies had always existed, though not really
recognized in the banking system and in the economy at large. The increase rate
of money circulation in the economy, due to the rapid growth of commerce and
industry has made the monetary authorities (central Bank of Nigeria)
increasingly Interested in making an effort to have money supply and credit
conditions controlled, so as to maintain a relative economic stability. And so,
the central bank of Nigeria
was empowered to carryout the monetary formulation and execution in
consultation with the federal ministry of finance.
Also,
the need to generate revenue for the increase of investment and the pattern of
expenditure for the purpose of influencing economic activities glares for the
formulation of fiscal policy. The economy has also witnessed a lot of economic
depression, especially the great depression of 1930. as they continued having
an unbalanced budget or the budget adding to the cyclical fluctuations, there
was the need for these economic ills to be corrected and the fiscal policy
succeeded in correcting these ills of the economy. The fact was further
influenced by the emergence of growth and stability concept. In other words, if
any economy remains in equilibrium with resources only partially employed,
something must be done to unemployment.
Therefore,
to increase this level, employment could be done in two ways: it could be
either directly tackling the problem by employing more workers or directly tackling
it by offering inducement to produce or to increase instrument. Indeed, the
monetary and fiscal policies direct the total repentance on the economy. Their
effectiveness as stabilization or efficient tools remains an unsettled issue
among economists. They have been the efficient tools of economic stability.
According
to John Orji in his book titled “Element of banking” he listed measures to be
applied in using fiscal policy to solve economic problems or make the economy
stable as thus:
1. Fiscal policy and Recession: When
aggregate demand for goods and services, the level of employment and prices are
generally low, the economy is said to be faced with recession. In order to get
the economy out of recession, the government can apply fiscal policy to solve
the problem by taking the following objectives. Reduction in taxation, increase
in government expenditure, grants to industries and banks.
2 Fiscal Policy and Inflation: Inflationary
pressure is experienced when the aggregate demand is higher them aggregate
supply the price level tend to rise, thereby making the banks to borrow. The
resulting inflation can be controlled by fiscal policy by employing the
following methods: increase in taxation, reduction in government expenditure,
reduction of financial grants to firms etc.
1.2 STATEMENT
O PROBLEMS
There
has been instability in the economic system consing**** from flow of money.
There has never been sufficient time required for their policy weapon on such
key economic variable’s which is of crucial importance as an instrument of
economic stabilization. There has been situations where there is either excess
or shortage which has often affected unwarranted unbalances or destabilization
in the economy. Such instability or unbalance has never encouraged economic
growth. In other words, monetary and fiscal policies in most cases, have been
retarded which result in unbalance in the economy.
1.3 PURPOSE
OF THE STUDY
In
view of the background, the policies aimed at maintaining economic stability,
therefore this work aims specially to
achieve the following objectives:
1
To examine the monetary and fiscal policies and
ascertain how effective they have been in making poor conditions of the rural
areas fairs.
2
To know why despite the monetary and fiscal policies
formulated for economic development, the rural areas are still under-developed
and under-utilized for much needed economic transformation of the country.
3
To ascertain whether rural dwellers are included in
the various policies mapped out yearly, by the government vice central banks,
commercial banks and other financial institutions.
4
To determine why there should still be unemployment in
the economy, despite the existence of monetary and fiscal policies
5
To ascertain why monetary and fiscal policies as an
instrument of economic stabilization.
6
To indemnity the country economic problem with a view
to offer lasting solutions to them.
1.4 RESEARCH QUESTION
The
research questions include:
1
Is monetary and fiscal policies really the efficient
tools to economic stability?
2
Do monetary and fiscal policies contribute in growth
of the country economy
3
Has there been unbalance in he economy due ot monetary
and fiscal policies being retarded.
4
Does the absence of monetary and fiscal policies do any
harm to the economy?
5
Do monetary and fiscal policies contributes positively
towards improving an developing of rural areas.?
1.5 RESEARCH HYPOTHESIS
1 Ho: There has been instability in the
economic system arising form
flow
of money and credit condition before the introduction and fiscal policies.
2. HA:
There has not been instability in the economic system arising form flow of
money and credit condition before the introduction and fiscal policies.
3 Ho:
There has been unbalance in the economy resulting from m monetary and fiscal
policies being retarded
4 HA:
There has not been unbalance in the economy resulting from m monetary and
fiscal policies being retarded
1.6 SIGNIFICANCE OF THE STUDY
The There
has been unbalance in the economy resulting from m monetary and fiscal policies
being retarded
Cannot be
over emphasized in the management of the economy. This study is of great
importance to the society. So it will be deliberating on the need for a stable
economy. Therefore, this study will help;
1 The
government for a better budget planning so that there won’t be any suck case
like shortage or excess in the economy after making the budget.
2. The
financial researchers for better judgement or better decision making and
implementation.
3. To bring
up the need to apply the tools and to apply it correctly in the control of the
economic decision making supply and economic depreciation.
4 to guide
the central bank of Nigeria
and the government onhow to control the economy so as to avoid such cases as decrease
of money in circulation (deflation) instead it will keep a stable economy.
5 To
maintain stability in the external value of the currency using monetary policy.
6 To
attain a high, rapid and sustainable economic growth
7 To
maintain balance of payment equilibrium in the economy
1.7 SCOPE OF THE STUDY
This
research work is limited only to Nigerian economy. The limitation in the
Nigerian economy is with reference to central bank of Nigeria Awka.
Also
the researcher went on extra mile to obtain information and statistics
reasonable enough and for fiscal policies as efficient tool for economic growth
and stability.
1.8 LIMITATION OF THE STUDY
In
carrying out this project work, the research is faced with certain limitations
among which are:
1. TIME
LIMIT: This is as a result of the short semester and tight academic schedule
for lecture free period and weekends.
2. FINANCE
LIMIT: Because of the economic situation of the country and many expenses which
has been met, the researcher is faced with limited finance, also the high cost
of transportation, which is the reason why one cannot reach all the possible
sources of information required for the
project but nevertheless, enough information or data were collected.
1.9 DEFINITION OF OPERATIONAL TERMS
MONETARY POLICY: There are many definition of
monetary policy as there are many writers on the topic. However, for the purpose
of this study, a few definition will surface, for consideration. According to
Nwakpa P.N, monetary policy are the various ways which the federal government
and the central bank seek to influence the supply of credit as well as their
price in order to achieve a stated described economic goal. The desired goal
include, to improve the rural area and maintain healthy economy. According to
John Orjih in his book titled “Elements of banking” Defined Monetary Policy as,
any conscious action undertaken by the monetary authorities to change the
volume, quantity, availability, cost and direction of money and credit in a
given economy. He also went further to
define it as the credit control measures adopted by central banks to control
the supply of money as an instrument for achieving the objectives of general
economic policy. According to Okpala C.M. In his book titled “Banking in Nigeria issues and
concept” defined monetary policy as: A deliberate effort by the monetary
authorities (The central bank) to control the money supply and credit
contributions for the purpose of achieving certain broad economic objectives
using the following instrument tools.
1. Open Market Operation (OMO): This is an
activity of buying and selling of government securities in the open market by
the central bank of Nigeria.
When prices rise, and there is the need to control them, the CBN sells securities
to the public. These securities includes: treasury bills, government bonds,
treasury certificates etc.
2 Legal
reserve Ratio: This is the ratio of cash reserves that banks are required to
maintain. It is the percentage of commercial bank deposits (from customers)
that the central bank requires them to set aside either in an account with the
central bank (cash ratio) or in approved securities that is liquid assets.
3 Discount
Rate / Rediscount rate (Bank rate: This is the rate at which the central bank
lend money to commercial banks, discount house, and other financial
institutions (rediscount rate).
4 Liquidity
Ratio: This is a method which compels the banks to spread / diversify their
portfolio of liquid assets holding
5 Moral
suasion: This is a credit control measure applied by the central bank of Nigeria which
involves informal discussions with the official of commercial banks.
6 Directives:
This is a method applied by the central bank in giving instructions about the
credit and banking policies that could be purchased by the financial sector for a
given fiscal period.
7 Fiscal
Policy: This is he means by which a government adjusts it’s spending levels and
tax rates to monitor and influence a nations economy. According to the oxford
Advanced Dictionary, it defined fiscal policy as the creation of tax
structure and the determination of the amount of tax revenue and the direction
of government expenditure for the purpose of attaining a specific objective
such as: greater dependence on our own resources through development of the
area.
According to Okpala C.M in his book
titled “Budgeting” the defined fiscal policy as government’s conscious attempt
to client the economic activities towards achieving growth and stability.
According to C.C.N Asuzu (1995), he
defined fiscal policy as that part of government policy concerning the raising
of revenue through taxation and other means and deciding on the level and
pattern of expenditure for the purpose of influencing economic activities.
These
economic activities are directed towards the broad objectives of attaining
economic growth and stability.
8 Economic Growth: Simply means a rise in
the per-capital income of a given economy.
9 Economic stability: Means a situation
characterized by stability in he price level and full employment
10 The Budget: Fiscal policy is
implemented through changes in he budget. The budget is a financial statement
of the sources (revenue) and uses (expenditure) of fund of the government,
which is prepared by the ministry of finance for discussion and approval.
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