ABSTRACT
The purpose of this research is to enlarge important
of the modern state of guarantee
adequate provision for living and the need for economic growth in large part of
the world have donated to the entrance of the prestige of monetary policy as
an important instrument of economic
policy and the essence would be laid on how the monetary authorities used these
in controlling some major micro economic problems now rampart in our
society monetary theories : various definition have been given to monetary
policy by different economist.
Ginham (1980) define monetary policy as the credit
control measure adopted by the central bank while I proposed the monetary
policy has a final say who by the central bank of Nigeria because the money
generated from there side and also
monetary policy order to influence the supply of money, implemented via a wide range of institution both public and private to influence the level
of economic activity. The positive role of monetary policy in the finance
system having been recognized, the question arise about the objectives and roles of this policy economist
have from time to time mentioned different roles of the monetary policy.
The central bank of Nigeria which is the apex financial
institution and regulatory body of monetary credit, foreign trade and exchange
policy in the country was established in 1958 under the act of parliamentary
know as central banks Act for many years before the establishment of the bank a
rudimentary monetary system had already begin the process of transforming.
Review of monetary policy in Nigeria: since
independence monetary policy regimes in Nigeria can be divided broadly into
two: 1960 to 1986 and 1987 to date pre-1986 period.
The economic environment that guided monetary policy
before 1986 when the structural adjustment programme (SAP) introduced was
characterized by the growing importance of the oil sector, the expanding role
of the public sector in economic and over-dependence on the external sector.
During the period, the major objectives of monetary
policy were the maintenance of relative price stability and healthy balance of
payment position as well as the acceleration of the pace of economic
development.
The focus on sectoral distribution of bank credit
through the period was stimulate the productive sectors and therefore stem
inflationary pressures.
The monetary policy which is one of the policy tool
that can be used to achieve the macro-economic objective of a nation is aimed
at maintenance of full employment, ensuring domestic price stability
stimulation economic growth and development and maintenance healthy balance of
payment equilibrium in order to evaluate the adequate of its operation in
Nigeria.
TABLE OF CONTENTS
TITLE
PAGE
APPROVAL SHEET
DEDICATION
AKNOWLEDGEMENT
TABLE OF CONTENT
CHAPTER
ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
1.2
STATEMENT OF THE PROBLEM
1.3
OBJECTIVE OF THE STUDY
1.4
SIGNIFICANCE OF THE STUDY
1.5
SCOPE
OF THE STUDY
1.6
ORGANIZATION AND PLAN OF THE STUDY
CHAPTER
TWO
LITERATURE
REVIEW
2.1
MONETARY THEORIES
2.2
PROCESS OF FORMULATION OF MONETARY POLICY
2.3 THE
ROLE OF MONETARY POLICY
2.4
INSTRUMENT OF MONETARY POLICY
2.5
TARGETS AND INDICATION OF MONETARY
2.6
REFERENCES
CHAPTER
THREE
CASE
STUDY AND METHODOLOGY
3.1
BRIEF HISTORY OF CENTRAL BANK OF NIGERIA
3.2
RESEARCH METHODOLOGY
3.3
SOURCES OF DATA COLLECTION
3.4
METHOD OF DATA ANALYSIS
CHAPTER FOUR
DATA PRESENTATION
4.1
REVIEW OF MONETARY POLICY IN NIGERIA
4.2 MONETARY
POLICY OF YEAR 2001 FISCAL YEAR
4.3 COMPARING
YEAR 2000 AND 2001 FISCAL YEAR MONETARY POLICY
4.4 IMPACT OF MONETARY POLICY ON
NIGERIA FINANCIAL SYSTEM
CHAPTER
FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.
1 SUMMARY
5.2 CONCLUSION
5.3 RECOMMENDATION
5.4 LIMITATION OF THE STUDY
5.5 BIBLIOGRAPHY
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The growing importance of the modern
state at ensuring adequate provision for' living and the need for economic
growth in large part of the world have contributed to the entrance of the
prestige of monetary policy as an important instrument of economic policy.
This write up will examine and
explain various monetary policy instruments that have been used in Nigeria
since the inception of the Central Bank of Nigeria (C.B.N) which is the
regulator^ body u6ecl by the Federal Government to regulate and control the
money in circulation. The policies are designed in an attempt to change the
trends of some monetary.
Variables in
particular and directions
so as to induce the desired behavioral change in
the monetary sector.
Emphasis would be laid on how the
monetary authorities used these polices in controlling some mayor macroeconomic
problems now rampant in our society.
One of the primary responsibilities
of any government is to ensure that citizens attain" a high standard of
living, the monetary policies consist of action taken by government to help in
achieving economic objectives.
Some of these objectives are as
follows
i.
Full employment
ii. Rapid
economic growth and development
iii. Price
stability
iv. Equality
in distribution of income
v. Stable
foreign exchange rates
vi. Attainment
of self reliance in the economy
vii. Correction
of balance of payment deficit.
Any
government whether a
developed or a developing country economic objectives
which might be economic growth so as to increase the wealth per head of the population
or the prevention of loss
or real output and the cost that
result from the failure to maintain the economy at its full potential output
level, the improvement of the functioning of the economy by restraining excess
demand and inflationary price increase from imposing real cost on society and
the restraint off any tendency of the economy towards a chronic balance of
payments Disequilibrium.
Therefore, in an effort to achieve
these objectives government have put in place a number of different policy
tools such as monetary policy that is topic under discussion other policy tools
are fiscal policy, credit policy, foreign trade policy and exchange rate
policy.
The
research work will
also look into
the instruments or weapons of monetary policies such as open market
operations, interest rate, special deposit, reserve requirement, request and
directives and finally given suggestions and recommendations on
how these policies could be
effectively used.
1.2 STATEMENT OF THE PROBLEM
Monetary policy has a major role to
play in the Nigeria finance system and the economy in general.
To
ensure efficient and
effective growth in
the economy. Monetary policy must be allowed to stay for a period of
three to four year -to ensure stable economy growth and enhance the control of
monetary in the money and capital market.
The monetary policy when not in good
planning and control will contribute to the inflationary trend of the nation
economic. Although the performance sheet of the economy shows that economy is
on good track but inflation rate continues to gallop for instance during 1999
fiscal year the rate of inflation stood at 15 percent, in year 2000 its reduced
again to 0.9 percent at present it as shoot up to 5.5 percent.
These have contributed to the poor
economic growth, in stabilization in the market system, inequitable distribution
of income. The above discussions shows that not allowing the monetary policy to
last for longer period before
introducing another current
measure is a problem facing the economy of the country
and also the regulatory body of the policy ought to take caution and exercise
adequate economic skills aim at achieving the best for the country.
1.3 OBJECTIVE OF THE STUDY
The main objective of this study is
to indemnify the importance and impact
or to evaluate
the role of monetary policy and its impact on the
financial system.
And to examine critically the
adequate of monetary policy in Nigeria and then relate the general theoretic-background
and establish specific monetary policy indicated by
the structure and
character of Nigeria economy.
In addition, it will also examine the
historical potency of contemporary monetary policy in the changing economic
circumstances of Nigeria growing effort and possible prefer suggestions.
1.4 SIGNIFICANCE OF THE STUDY
This research work is important to
every sector and everyone within the nation. Economists agree that money plays
an important role in the economic development and growth process of a nation,
ever since the days of an ancient Greek writer - Philosopher - Plato Aristotle
and Xylophone write dealing with., money have dwelt on the issue of monetary
policy. Monetary policy involves some process which will bring about the growth
of the economic; these are the objective of monetary policy (the goals of the
policy), policy formulation, and choice of policy instrument, policy
implementation and policy evaluation / adjustment.
All these process will bring about
great impact on the activities of the financial institutions that helps in the successful
execution of the policies through their dealing with-general public, the
introduction of these policy have increase the level of activities in the
economy.
1.5 SCOPE OF THE STUDY
The research work is designed to
cover almost all the areas of
the goals of
monetary policy and
its instrument. It will deals
with the impact,
trend and indicator of various
monetary tools been used in Nigeria finance system to the supply of money and
cost of money-is .Nigeria banking system.
1.6 ORGANIZATION AND PLAN OF THE
STUDY
In line -with the above discussion,
these stages briefly states the outline of the various' chapters in the project
work. In the light of the above, the project shall be divided into five
chapters in order to achieve the aims of the project; each chapter shall deals
with all the important aspect of the topic. Chapter one of the report will
contain the introduction of the theme of the project work by giving the
background of the study, statement of problem of study, objective of the study;
significance of the study, scope and limitation of the study and the organization
of the study.
Chapter two will focus and deals with
review of various literature materials on monetary policy.
Chapter three will focus on the brief
history of the regulatory body of monetary policy in Nigeria which is the Central
Bank of Nigeria (CBN) and the research methodology used.
Chapter four will analysis stating
the information received so far on the on the monetary policy that is the
review of monetary policy in Nigeria, comparison of current year monetary
policy with previous year and the impact of monetary policy and Nigeria finance
system.
Lastly, chapter five would cover or
will be devoted to summary, conclusion and recommendation.
Through its influences on aggregate
demand and hence on output. This school of thought even argues that a modest
rate of growth because it is only in such circumstances that the rate of profit
would rise and the motivation to invest would increase.
It is further argued that the use of
monetary policy to achieve growth can aid the achievement of some other
objectives such as full employment,
The other view on monetary policy is
the classical view as redefine by
Milton Friedman. According to this view, monetary policy cannot-be used, to achieve
a legal unemployment which is lower than the natural rate of unemployment.
However in an attempt to correct the new unemployment problem with an increase
in money supply will simply lead to a repetition of the business cycle and this
would destabilized the economy, the monetary policy which have been discussed
above can further be illustrate with the use of business cycle which clearly
show the rate of stabilization in the economy.
BUSINESS CYCLE
Keynesian view is that monetary
policy should be directed at interest rates rather than money supply and that
monetary policy should at all times be directed at interest rates rather than
money supply and that monetary policy should at all times be subsidiary to
fiscal policy, the monetarists recommend that control of money supply should
the major concern of the monetary authorities.
The Keynesian view says since
inflation is a sign of Economic overheating and rise in interest rate will tend
to cool it down by checking investment and thence overall demand conversely
during the period of recession economic activities could be stimulated by
lowering the interest rates.
However, Keynesian argue that
monetary policy will be more effective if the authorities aim'-to- control
interest rate directly rather than indirectly through the money supply.
Therefore, the Keynesian versus monetarist’s
debate given the conflicting advice to government on the role and effectiveness
of monetary policy. According to Paul Einzigg, monetary policy is the altitude
of the political authority towards the monetary system of the communicate under
the control. Declaring this definition tool vague to be of sufficient practical
use, the same writer defined an idea monetary policy "as the effort to reduce
to a minimum the disadvantage and increase the advantages, resulting from the
existence and operation of monetary system".
M.C Vaish (1981) gave his own definition of monetary
policy this is meant/ the Central Banks control over the supply and cost of
money as an instrument for achieving the objectives of economic policy of the government.
Click “DOWNLOAD NOW” below to get the complete Projects
FOR QUICK HELP CHAT WITH US NOW!
+(234) 0814 780 1594
Login To Comment