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An Empirical Analysis of Monetary Policy and Private Sector- Led Investment in Nigeria, 1986-2011.

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An Empirical Analysis of Monetary Policy and Private Sector- Led Investment in Nigeria, 1986-2011.
AN EMPIRICAL ANALYSIS OF MONETARY POLICY AND PRIVATE SECTORLED INVESTMENT IN NIGERIA, 1986-2011.

BY

EZIE OBUMNEKE Department of Economics Bingham University, Karu, Nasarawa State 08069430911 eobumneke@yahoo.com

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ABSTRACT This study undertakes an empirical analysis of the impact of monetary policy measures on private sector-led investment in Nigeria between,1986-2011. In the process, a number of traditional hypotheses on nominal interest rates, nominal exchange rates and broad money supply reflecting Central Bank of Nigeria, CBN, monetary policy measures and private sector investment are statistically tested. Co-integration and unit root test conducted for the variables shows that they have a long term, or equilibrium relationship between them. The estimated log-linear multiple regression equation reveals that inadequate infrastructural facilities made returns on autonomous part of private sector investment negative. This was captured by the negative numerical value of the intercept. Another important revelation is that exchange rate depreciation raises the cost of imported goods, and since a large part of investment goods are imported in Nigeria, such depreciation dampens private sector investment. The prevailing interest rate structure encouraged private sector investments in the tertiary sector at the detriment of the primary sector due to the increase in broad money supply. Finally, the statistical significance of nominal interest rates, nominal exchange rates and broad money supply as determinants of private sector investment are all poor, thus indicating that the CBN monetary policy measures had no significant impact on private sector investment in Nigeria between 1986-2011. Suggestive from the analysis therefore are that effective policies and basic infrastructural facilities that would improve national income and productivity should be provided.

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I.

INTRODUCTION Over the years, monetary policy objectives have remained the attainment of internal


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