IMPACT OF MONETARY POLICY ON MANUFACTURING SECTOR IN NIGERIA

Abstract

The study examined the impact of monetary policy on manufacturing sector in Nigeria. The study spanned through 1981 to 2022. The Autoregressive Distributed Lag (ARDL) Bounds testing method was used in this study to look for long-term relationships. The ARDL cointegration model also captures the long run dynamics. The ARDL Bounds test results indicate that monetary policy and the manufacturing sector's contribution to the GDP have a long-term relationship. According to the results, only (CPR) was shown to have a positive and significant impact on (MANU) during the period under consideration. In the short term, (INTR) and (INF) both had negative and no significant impacts on (MANU). While in the long run, (INTR) was also found to be negative and no significant impact, and also (INF), has no significant impact on (MANU) only (CPS) was found to be positive and significant. Therefore, the study came to the conclusion that, both in the short and long term, effective and efficient monetary policy may be used to stimulate the manufacturing sector's contribution to the GDP. Because the manufacturing sector is large, the study suggests that in order to promote stable growth of the gross domestic product, the monetary policy rate should be controlled in a way that favours the productive sector of the economy.