An Evaluation of Monetary Policy and Manufacturing Sector Performance in the Nigerian Economy

Abstract

This study considered monetary policy and manufacturing sector performance in Nigeria using annual time series spanning from 1981-2018, sourced from the Central Bank of Nigeria statistical database and the National Bureau of Statistics (NBS). A natural logarithm was taken for the data to show precision, uniformity and robustness of estimates. The Unit root test indicates that the variables were stationary at first difference. The Johansen test showed that there exist long run equilibrium relationship. The VECM gave a speed of adjustment of 55% which indicates that previous period deviations revert to an equilibrium state. The Causality test proved that changes in money supply precede changes in the performance of the manufacturing sector. On the basis of these findings, the study proposed that monetary authorities should implement feedback policies that will make for more loans to be given to the manufacturing sector. Also, Government should create more intervention policies and a thorough feedback mechanism targeted to the manufacturing sector as this will cause loans to be cheaper for investors. When implemented, these policies will invigorate economic / investment activities that will spur economic performance in the Nigerian economy.

Keywords: Feedback Policies, Manufacturing sector loans, Intervention, VECM, and CBN.