1.1 BACKGROUND OF THE STUDY
usually involve the expansion or contraction of money supply the manipulation
of interest rates to make borrowing easier and cheaper or more difficult and deicer depending an prevailing economic
condition and challenging of fund to
growth sector for increased output. Monetary policy is an integral part of the
overall economic policy that regulate the level of money or liquidity in the
economy in order achieve some desired policy objective.
is usually the responsibility of the monetary authorities which comprises the
central bank and the federal government.
In Nigeria the central bank exercise primary responsibilities for
initiating articulating implementing and appraising such policy the banks proposal
are subject to ratification by the federal governments.
policy measures are monetary management
techniques put in place by the government through the central bank. These
measures relay on the control of money stock that is supply of money in order
to influence broad economic objective which include price stability high level
of employment sustainable economic growth and a balance of payment equilibrium
these bread objectives are achieved through the use of appropriate instruments
depending on which objective the policy formulates want to achieve and also in
the level of development of the economy.
application of monetary policy measures as instrument of economic stabilization
and instrument of monetary policy are determined by the nature of the problems
to the solved and by the environment in
which these problems exist.
broadly two categories of these instruments namely indirect or market based and
direct instrument indirect instrument are usually used in market based
economics where the quantity of money stock can be effected through the
relationship between money supply and
reserve money as well s the ability of the monetary authority to influence the
creation of reserves. The reserves and money supply can be affected through the
Change in reserves/ deposit ration
Change in discount rate
Interest arte change
Engaging in open market operations (OMO)
In an under
developed financial environment the instrument of monetary management are
largely limited of direct measure which set monetary and credit targets ate
desired level. The major direct control measures is direct interest regulation
however quantitative ceiling or overall credit operation is also used.
of monetary policy are applied in the achievement of various objective. However
all such objective are in consonance with the
board objective of he first
national rolling plan 1990-1992 which are the consolidation of the achievement
made so far in the implementation of the structural adjustment programme
(SAP). The plan is also to deed with
pressing problem of inflation particularly manufacturing and the inadequate
availability of foreign exchange with the aim of achieving higher level of
overall capacity utilization. It hopes
also to address the issue of low growth of non-oil exports other socio economic
problem to be addressed by the plan include the high growth rate of population
threats to the environment an the manager of
anti-social behavious such as armed robbery.
These broad objective
can be broken down to more direct objective namely. A high level of employment
price stability a sustainable level of
economic growth effectiveness of monetary policy measures against which
background of objective they were formulated has raised serious doubts as to the continuous use of
these policy measures.
It is in the
light of the above theoretical background that the author/ writer wishes to
carry out a study of monetary policy measures as an instrument of economic stabilization.
1.2 STATEMENT OF THE PROBLEM
Over the years
so may instrument of monetary policy have been in vogue not only to gear up the
level of investment but to cheek the perennial problems of unemployment prices
level instability lack of sustainable economic growth balance of payment
disequilibria imbruing to mobilize domestic saving a out put these level
consistently and persistently done severe damage to the Nigeria economy but
most strikingly these problem have continued
to plagues the economy unabated.
It is against
this background that the problems of this study have been identified and they
are as follow.
Are monetary policy measures effective as instrument of
Have there been any significant variation in the use of
monetary policy to achieve desired objective and what has been the outcome
Is the implementation of monetary policy ideal
Could there by any remedy to these problem and family.
Are there conduits or relationship between monetary
policy and fiscal policy measures