Price Stabilization in the Nigerian Economy: An Assessment of the Role of Fiscal and Monetary Policy Instruments

9 Pages Posted: 12 Apr 2005

Abstract

Essentially, this study assesses the effectiveness of monetary and fiscal policy instruments as employed in controlling the problem of inflation in Nigeria. Specifically, a ten year period was used to measure the extent to which the dependent variable (i.e., inflation measured by composite consumer price index) is determined or control by the independent variable(s) (i.e., money supply for monetary policy on the one hand and on the other hand government expenditure and taxes for fiscal policy). It is the conclusion of the paper that, in Nigeria, it is not only the instruments of monetary and fiscal policy that determines the rate of inflation, but there are other factors that contribute immensely to the persistent rise in the prices of goods and services in the country. The paper further recommends that, there is the need for the fiscal and monetary policy to be deliberately harmonized, coordinated and integrated to move the counter productive conflict that absence of this effort could bring. In situation where the monetary authority is made to finance fiscal deficit that are below market rate of interest undermines the efficacy of monetary policy and underscores lack of pursuit of common goals among the relevant organs of government. Furthermore, the financial system in the country should be strengthened and improved upon in depth as well as in scope. Economic surveillance and intelligent capabilities need to be substantially improved, especially, in the area of high-tech information and communication systems. This will ensure availability of up to date, relevant and timely information at all times.

Keywords: Effectiveness, monetary, fiscal instruments

Suggested Citation

Tanko, Professor Muhammad, Price Stabilization in the Nigerian Economy: An Assessment of the Role of Fiscal and Monetary Policy Instruments. Available at SSRN: https://ssrn.com/abstract=689703 or http://dx.doi.org/10.2139/ssrn.689703

Professor Muhammad Tanko (Contact Author)

Kaduna State University ( email )

Tafawa Balewa Way
P. M. B. 2339
Kaduna State
Nigeria

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