Paper Title
Monetary Policy and Nigeria’s Balance of Payments
Abstract
The insistence by most Scholars that the Balance of Payments (BOPs) is a monetary phenomenon suggests
thatany disequilibrium so observed can be eliminated through a careful manipulation of monetary policy. Thus, the objective
of this paper is to investigate the effect of monetary policy on Nigeria's Balance of Payments between1980 and 2016. Times
series data were sourced from secondary sources and analyzed using descriptive statistics and the Dynamic Ordinary Least
Square (DOLS) proposed by Stock and Watson (1993).Based on the estimated results, the coefficients of all the regressors-
Broad Money Supply (M2), Interest Rate (ITR), Exchange Rate (EXR) and Gross Domestic Product (GDP)- conformed to
apriori expectations. Furthermore, the result of the analysis shows that all the variables were statistically significant at 5
percent level. The policy implication of this finding is that all the variables are key determinants of Balance of payments
equilibrium in Nigeria. The study concludes that there is need for a stable macroeconomic environment to reduce BOPs
deficits in Nigeria and recommends that monetary policy measures should target adequate broad money supply, stable
interest rate and exchange rate in order to promote sound economic activities to stem the tide of Balance of payments
deficits.
Keywords - Money supply, Interest rate, Exchange rate and BOP