IMPACT OF MONETARY POLICY ON INFLATION TARGETING IN POST PANDEMIC ECONOMY. EMPIRICAL EVIDENCE FROM NIGERIA

Abstract

Persistent inflation remains one of the most challenging economic situations in Nigeria, despite the deployment of various monetary policy tools. This paper examined the effects of some of the indices of inflation, such as, Monetary Policy Rate (MPR), Cash Reserve Ratio (CRR), and Broad Money (M2), using monthly data. Data were extracted from the Central Bank of Nigeria database. Unit root test was tested to ascertain the stationarity property of the variables. Descriptive analysis indicated that inflation remained high during the period under review, alongside elevated monetary policy and reserve ratio levels. Ordinary Least Squares regression showed that the variables of monetary policy jointly explained 
a substantial proportion of the variation in inflation. The Monetary Policy Rate (MPR) have a positive and significant effect on inflation, while the Cash Reserve Ratio (CRR) had a significant negative effect. However, Broad money supply (M2) exerted an insignificant but positive influence on inflation. These findings demonstrate that interest rate and reserve ratio policies were the primary drivers of inflation during the study period, whereas changes in broad money supply played no role. Following the findings, monetary authorities should strengthen the coordination and timing of adjustments to the Monetary Policy Rate (MPR) and Cash Reserve Ratio (CRR) and complement these measures with non-monetary strategies to sustain price stability.