THE IMPACT OF MONETARY POLICY ON PRIVATE SECTOR CREDIT IN NIGERIA

Abstract

This study empirically examined the impact of monetary policy on credit to the private sector in Nigeria. The study underscores the importance of how monetary policy decisions affect financial intermediation and private sector financing in Nigeria. The study adopted the ex-post facto research design using secondary time series data obtained from the Central Bank of Nigeria (CBN) statistical bulletin covering the period 1985 to 2024. The Autoregressive Distributed Lag (ARDL) estimation technique was employed to examine the long-run relationships between monetary policy variables and credit to the private sector. The empirical results revealed that monetary policy interest rate has a negative and significant impact on credit to the private sector in Nigeria while money supply exerts a positive and significant impact on private sector credit. The cash reserve ratio was found to have a negative and insignificant impact on credit to the private sector. The study concludes that monetary policy plays a significant role in influencing private sector credit in Nigeria. The study recommends that the monetary authority in Nigeria should maintain a balanced interest rate policy and promote liquidity expansion strategies that support private sector lending and economic growth in the country.