Monetary Policy and Cement Production in Nigeria

Abstract

In Nigeria’s quest for industrial growth and infrastructure development, the cement sector plays a pivotal role. However, its performance is intricately linked to macroeconomic conditions, especially monetary policy and exchange rate progressions. Hence, fluctuations in monetary indicators can significantly influence production costs and output levels. The specific objective of the study is to investigate how monetary policy instruments, namely; rate of exchange, inflation and money supply, affect the performance of Nigeria's cement industry. The aim is to find out the long-run relationship between these macroeconomic variables and cement production, using the annual time-series data during 1981 - 2023, by applying an ARDL (Autoregression Distributed Lag) model. Result show 
that money supply and exchange do not have a significant effect on cement output performance, while monetary policy rate, liquidity ratio and domestic credit to the private sector have a significant and positive effect. This suggests that an expansionary monetary policy could boost the capacity of cement production by increasing the level of liquidity. The paper suggests that stability in the exchange rate, sufficient money supply and accessibility to credit markets are the necessary conditions under which optimum output of the sub-sector can be assured.