The Impact of Monetary Policy on Micro-Economy and Private Investment in Nigeria

Abstract

The paper critically evaluated the impact of monetary policy on micro –economy in relation to private investment in Nigeria. The data were collected from the CBN bulletin records 2008. Correlation analysis was performed and showed the empirical relationship between Private Investment (PI) and Money Supply (Ms), Interest Rate (IR), Credit CD, Inflation (INF), Exchange Rate (EXR) and GDP is significant at 0.01level of significance. Ms is significant at 0.01 with PI, CD and GDP but not significant with IR, INF and EXR. The interest Rate IR is only significant with INF. CD is significant at 0.01 level of significance with PI, Ms, Exchange Rate EXR and GDP. Inflation Rate INF is significant with Interest Rate IR. Money supply was found to be effective monetary policy instrument than the interest rate. This is based on the fact  that private investment react more to changes in money supply than the interest rate in Nigeria, however the correlation result showed that private investment increase as money supply increase this is because of the direct relation both variable are having, it is so simple in that an increase in money supply.

Keywords: Private Investment, Keynes, Money, Schools, Measures