Abstract
This study investigates the effect of monetary policy on economic growth in Nigeria from 1982
to 2022, utilizing time series data sourced from the World Development Indicators and the
CBN Statistical Bulletin. The specific objectives are to analyze the effects of interest rate,
exchange rate, money supply, and cash reserve ratio on gross domestic product (GDP) in
Nigeria. The data analysis techniques employed include descriptive statistics, unit root tests,
bounds cointegration, the autoregressive distributed lag (ARDL) estimation method, and
residual diagnostics tests. The Augmented Dickey-Fuller (ADF) unit root tests reveal a mix of
I(1) and I(0) series, indicating that the variables differ in their levels of integration. Evidence
of cointegration was established, suggesting a long-term equilibrium relationship among the
variables. The ARDL results indicate that money supply has a significant positive effect on
GDP in Nigeria, revealing that a unit increase in money supply increases GDP. Cash reserve
ratio, exchange rate, and interest rate all show a negative effect on GDP, suggesting that an
increase in cash reserve ratio, exchange rate, and interest rates decreases GDP in Nigeria.
Owing to these findings, this study concludes that monetary policy significantly influences the
growth of real GDP in Nigeria. Thus, it is recommended, among other things, that the Central
Bank of Nigeria should consider an expansionary monetary policy stance. This can be achieved
by increasing the money supply through open market operations, reducing the monetary policy
rate, or lowering the cash reserve requirement for banks. Additionally, the Nigerian
government should consider gradually lowering the cash reserve ratio to free up more funds
for banks to lend to businesses and consumers. This move can help spur investment and
consumption, ultimately boosting real GDP.