Effect of monetary policy instruments on the performance of Nigeria's financial market
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Date
2017
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Department of Finance, Faculty of Management Sciences, University of Ilorin, Ilorin, Nigeria.
Abstract
A significant tool for economic management is the monetary policy. The monetary policy of any nation is a combination of packages channeled towards achieving certain macroeconomic objectives. These objectives include economic growth, full employment, price stability and favourable balance of payment. This achievement of these objectives however depends on the strength and depth nation's financial market. This study examines the effect of monetary policy of the Nigerian government on the financial market. Secondary data between 1981 and 2016 were used and the dependent variables adopted are all share index and credit to private sector (CPS), both standing as a proxy for money and capital markets respectively while the independent variables used are monetary policy rate, broad money supply(M2) and liquidity rate; the trio representing monetary policy instruments. The findings of the study show that monetary policy instrument of the Nigerian government have varying degree of impact on the performance of both the money and the capital markets. Based on the findings, the study recommends that through the regulatory authorities should cautiously avoid discretionary policies that might affect lending rate; otherwise investors' apathy would mar the development strides already witness within the market.
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Keywords
Monetary policy, Money market, Capital market, Economic management