MONETARY POLICY AND INVESTMENT BEHAVIOUR IN NIGERIA Lawrence Ayemere Ibadin
Department of Accounting
Department of Economics, Adekunle Ajasin University , Akungba Akoko, Nigeria Abstract
The study seeks to empirically ascertain the impact of the monetary policy and credit guidelines of the Central Bank of Nigeria on private domestic spending-defined in terms of business fixed investments. To carry this out, the paper relies on recent developments in co-integration and error correction modelling techniques. The results of the analysis show that greater reliance can be placed on monetary policy as a veritable instrument for correcting some of the major macro-economic ills facing the economy. It is recommended, amongst others, that monetary policy should be made much more effective in terms of doses and frequencies while, at the same time, avoiding sharp and wide swings in policy initiations.Keywords: Monetary Policy, Investment Behaviour
The importance of an enhanced and sustained investment spending in any economy in general, and Nigeria in particular, cannot be overemphasized. This realisation probably informed the seemingly aggressive drive of the present Obasanjo-led administration that has embarked on wooing foreign private investors to invest in the various sectors of the Nigerian economy.However, investment, for the purpose of this study, refers to investment in physical assets, that is, in machinery and equipment by the private sector of the economy. As such, a genuine and adequate expenditure on business fixed assets will increase the level of economic activities (through increased production of goods and their services). This is capable of generating employment opportunities in the industrial sector, reducing or stabilizing the price levels, raising the Real Gross Domestic Products (GDP) values, and if properly directed, reducing the pressure on the country's balance of payments position.The various macro-economic...