IMPACT OF MONETARY POLICY RATE ON PRICE STABILITY IN NIGERIA

Abstract

Despite numerous monetary policy decisions by the CBN’s Monetary Policy Committee, Nigeria’s inflation rate (particularly in food, energy, and transport sectors) has remained persistently high. This study aims to assess the impact of the Monetary Policy Rate (MPR) on price stability in Nigeria. The paper is based on Central Bank of Nigeria (CBN) and National Bureau of Statistics (NBS) quarterly data generated for the period 2012 – 2025, which were analysed using the Dynamic Ordinary Least Squares (D-OLS) estimation technique. The results show that the MPR has a positive and significant impact on prices across these sectors, with a 1% rise in MPR leading to a 5.64% increase in food prices, 7.36% in energy prices, and 5.38% in transport prices. In contrast, the Lending Rate (LR) has a negative and significant impact on price across sectors, reducing food prices by 6.62%, energy prices by 6.23%, and transport prices by 5.19% for every 1% increase in the Lending Rate (LR). The study recommends that the Central Bank of Nigeria can use the MPR to manage inflation.