MONETARY POLICY AND INDUSTRIAL SECTOR PERFORMANCE IN NIGERIA: MEASURING THE EXTENDED IMPACT ON THE ECONOMY

Abstract

The study empirically investigates the impact of monetary policy shocks on the performance of the industrial sector in Nigeria, and how this affect the general growth performance of the economy in the periods 1980-2018. Monetary policy variables used were money supply (M2t), monetary policy rate (Mprt), Treasury bill rate (Tbrt) and Credit to the private real sector (Credt). We also gauged the system with other control variables like gross fixed capital formation (gcft), inflation (????t) and exchange rate (exr). Utilizing Vector Autoregression (VAR) and Generalized Method of Moments (GMM), we found that any unanticipated shock on monetary policy rate and money supply growth will produce falling impact on industrial sector output that is consistent with no sign of convergence throughout the period. However, shocks to credit supply and treasury bill rate produces positive growth outliers at different magnitudes in the industrial sector. We also found statistically significant pass-through effect of monetary policy from the industrial sector to the general economy of at least 30 percent growth effect. A number of possible policy menu capable of deepening monetary policy-industrial performance nexus in Nigeria in years following the study have been prescribed in the studyincluding improved stock market development, bond market development and other credit channels that easily linked policy to the private sector for seamless policy transmission.