EFFECT OF MONETARY POLICY ON PRIVATE SECTOR INVESTMENT IN NIGERIA
Charity Philip Sidi, Favour Kajyung Maisamari and Anama Idoko Rapheal
Volume 11 Issue 1
Abstract
Monetary policy plays a vital role in macroeconomic stabilization in an economy, but evident from numerous indices, illustrate sub-optimal performance of the private sector in the economy. It is on this bases that this study examines the effect of monetary policy on private sector investment in Nigeria spanning the period 1986 to 2023. The data used for the study was secondary time series annual data which were sourced from central bank of Nigeria (CBN), National bureau of statistics and world development indicator. The statistical software used to analyze the data is Stata version 15.0 and the techniques of analysis used in this study is Vector error correction model (VECM), this was achieved after conducting the unit root stationarity test, the variables such as private sector investment (PSI), exchange rate (EXR), interest rate (INTR) inflation (INF) and broad money supply (BMS), were found to be stationary at first difference 1(1), thereafter the cointegration test was conducted since there exist a long run association between the dependent variable and the independent variables this justifies the adoption of the VECM.. The findings revealed that broad money supply and exchange rate has positive effect on private sector investment, while interest rate and inflation rate were found to have a negative relationship with private sector investment. The study recommends low interest rate since it makes borrowing cheaper for businesses. This will enhance private sector investment as credit will become affordable for companies’ investment expansion or new project. Keywords: Monetary Policy, Private sector investment, VECM, Nigeria.
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