Monetary Policy And Nigeria’s Balance Of Payments
The insistence by most Scholars that the Balance of Payments (BOPs) is a monetary phenomenon suggests thatany disequilibrium so observed can be eliminated through a careful manipulation of monetary policy. Thus, the objective of this paper is to investigate the effect of monetary policy on Nigeria's Balance of Payments between1980 and 2016. Times series data were sourced from secondary sources and analysed using descriptive statistics and the Dynamic Ordinary Least Square (DOLS) proposed byStock and Watson (1993).Based on the estimated results, the coefficients of all the regressors- Broad Money Supply (M2), Interest Rate (ITR), Exchange Rate (EXR) and Gross Domestic Product (GDP)- conformed to apriori expectations. Furthermore, the result of the analysis shows that all the variables were statistically significant at 5 percent level. The policy implication of this finding is that all the variables are key determinants of Balance of payments equilibrium in Nigeria.The study concludes that there is need for a stable macroeconomic environment to reduce BOPs deficits in Nigeria and recommends that monetary policy measures should target adequate broad money supply, stable interest rate and exchange rate in order to promote sound economic activities to stem the tide of Balance of payments deficits.
Keywords - Money supply, Interest rate, Exchange rate and BOP