Journal of Emerging Trends in Economics and Management Sciences: Home

Abstract:
The main objective of this paper is to provoke some thoughts on the foreign exchange market and monetary management in Nigeria. To achieve this objective, time series data are obtained from the Central Bank of Nigeria publications on Trend of Monetary Policy Instruments, Money Supply, the Structure of Output proxied by Gross Domestic Product, Naira Exchange Rate Movements in the Official/ Parallel Foreign Exchange Market and the Foreign Exchange Allocation Utilization by End Users. Given the observed trends and variations in the exchange rate particularly within the Structural Adjustment Programme (SAP) periods and post-SAP periods, money supply and interest rate variations, it is clear that the monetary policy instruments were not efficacious in the attainment of price and exchange rate stability. Besides, growths in M1 and M2 cause inflation and there is an established relationship among Minimum Reserve Requirement (MRR), bank lending rate / savings deposit rate on one hand and inflation on the other. The study therefore recommends that there is the need for monetary authorities to recognize the importance of the linkage between the real sectors of the economy and the monetary system. Above all, interest rates should be to the benefit of the players/ actors in the real sector.

Keywords: price, exchange rate, monetary policy instruments, money supply and monetary management

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