Analyzing the Core Monetary Policy Instruments on Economic Growth in Nigeria: Using Error Correction Model

The study analyzes the core monetary policy instruments on economic growth in Nigeria: using error correction model, covering a period of 1986-2024. The variables which include monetary policy rate, Treasury bill rate, and cash reserve ratio against gross domestic product growth rate. The error correction model shows that monetary policy rate has a positive but insignificant impact on gross domestic product growth rate in Nigeria. Treasury bill rate has a negative and insignificant impact on gross domestic product growth rate in Nigeria. On the contrary, cash reserve ratio has a negative and insignificant impact on gross domestic product growth rate in Nigeria. The study concludes the monetary policy assist economic growth with an economy that is stable and predictable. The study therefore recommends that government should ensure that treasury bills are used to support productive activities and stimulate investment in key sectors of the economy. This could involve using treasury bills to finance infrastructure projects, support small and medium-sized enterprises and also to boost economic growth in Nigeria, the monetary authorities should reduce the cash reserve ratio in order to increase commercial banks’ liquidity.