Monetary Policy and Private Sector Investment in Nigeria
Abstract
This study examined the impact of monetary policy on private sector investment in Nigeria for the period of 1986-2024. It used time series data sourced from Central Bank of Nigeria Statistical Bulletins and World Bank Development Indicators of 2025. Using descriptive statistics which shows that the data were normally distributed based on Jacque Bera Statistics and its Probability values. It applied Augmented Dickey Fuller (ADF) test which revealed that I (1) and (0) order of integration exist among the studied variables which necessitated the adoption of Autoregressive Distributed Lag model (ARDL). The ARDL F-bounds test reveals that long-run relationship exist among liquidity ratio, cash reserve ratio, interest rate, open market operation exchange rate and private sector investment in Nigeria. Furthermore, longrun result showed that liquidity ratio, interest rate and open market operation have positive impact on private sector investment and statistically significant in the model except cash reserve ratio and exchange rate that are insignificant in the model. On the part of short-run dynamism, ECM revealed the speed of adjustment that monetary policy variables and private sector investment converged back to equilibrium point in 1year and 6 Months period. It also revealed that liquidity ratio, open market operation, exchange rate has positive impacts on private sector investment in Nigeria and they are statistically significant. Whereas, cash reserve ratio and interest rate have negative impact on private sector investment and statistically significant in the short-run. Therefore, this study submits that monetary policy has positive and significant impact on private sector investment in Nigeria within the period of the study. Finally, the study recommended the following policy options for the government, policy makers, and institutions regulators to formulate policy that will open ways that improve source of liquidity (finance) for private sector in Nigeria, to minimize the negative impact of cash reserve requirement on private sector investment, to open capital market for source fund for businessmen and women in Nigeria and ensure price stability which reduces the hike in foreign exchange rate for private sector to aggregate investment in Nigeria.