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Assessing the Impact of Monetary Policy on Economic Growth: An Empirical Study of Money Supply and Economic Expansion in Nigeria

Author

Listed:
  • Oluwagbemiga Ojumu
  • Gbolahan Solomon Osho
  • Victor Amadi

Abstract

This study investigates the dynamic impact of monetary policy on Nigeria’s economic growth, focusing on how variations in interest rates, inflation control, exchange rates, and money supply influence macroeconomic performance. Using time-series data from 1981 to 2022 and employing Autoregressive Distributed Lag (ARDL) and Vector Autoregressive (VAR) models, the research examines both short- and long-run relationships between key monetary variables and economic indicators, including GDP growth and inflation. The results reveal a long-term cointegrating relationship between monetary policy instruments and inflation, suggesting that policy tightening effectively moderates price instability, though often at the expense of economic growth. In the short term, changes in the money supply and exchange rates exert significant but temporary effects on output and prices. Findings highlight that while monetary policy remains an essential tool for achieving macroeconomic stability, structural challenges, such as exchange rate volatility, fiscal imbalances, and overreliance on oil revenues, limit its long-term effectiveness. The study concludes that Nigeria’s monetary policy should be complemented by fiscal discipline, economic diversification, and institutional reforms to achieve sustained economic growth.

Suggested Citation

  • Oluwagbemiga Ojumu & Gbolahan Solomon Osho & Victor Amadi, 2026. "Assessing the Impact of Monetary Policy on Economic Growth: An Empirical Study of Money Supply and Economic Expansion in Nigeria," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 18(4), pages 1-9, April.
    • Handle: RePEc:ibn:ijefaa:v:18:y:2026:i:4:p:9
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    References listed on IDEAS

    as
    1. G. Solomon Osho, 2019. "A General Framework for Time Series Forecasting Model Using Autoregressive Integrated Moving Average-ARIMA and Transfer Functions," International Journal of Statistics and Probability, Canadian Center of Science and Education, vol. 8(6), pages 1-23, November.
    2. Gbolahan Solomon Osho, 2025. "Oil Subsidy and Nigeria’s Economic Growth: A Blessing or a Burden?," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 17(10), pages 1-55, October.
    3. Gbolahan Solomon Osho, 2024. "Unitization in the oil and gas industry in Nigeria: Challenges, benefits, and regulatory framework," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2024(2), pages 69-86.
    4. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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