1.1 Background Of The Study
Mortuary policy is policy which deals with the discretionary control of money supply by the monetary authorities in order to achieve stated or desired economic goal (S.B falegan 1978). the monetarist believe that study and slow growth in the money supply is the best policy to follow. They argue that increase in the money supply that is about an increase in the purchasing power of the people and the result is inflation in the federal government, though the ministry of finance and the carnal bank of Nigeria are responsible for these policies. The central bank of Nigerian issues a monetary policy circular at the beginning of every fiscal year containing details of the government new monetary polices.
The Keynesian view is that monetary policy should be directed at interest rates rather than money supply and that monetary policy should at all times be subsidiary to fiscal policy. In general monetary policy refers to the combination of measure designed to regulate the value supply and cost of money in an ecology in consonance with the expected level of economic activity hence. It is signed to influence the behavior of the monetary variable aggregate policy conduct is at the instance of the monetary authorities to stabilize the economy.
This is in line with the views of monetarist who emphasis the role of money in explaining short term changes in natural income. Mill on freeman for example proved that coinages in money supply cause changes in natural income. And to stabilize the monetary sector therefore, the discretion any measure are applied desires portfolio to asset also considered. Consequently, the monetary authorities must attempt keep the money supply growing at an appropriate state to sure sustainable economic growth and maintain internal and external stability. This discretionary stability thus, involves the expansion of prevailing economic condition and thrust of policy.
Two type of monetary policy are:
- Expansion on a monetary ease policy
- Stringent or tight monetary policy
- Expansion ease policy is said to be a monetary ease policy when the monetary authority decides to increase the supply of money or reduce the cost of money in the economy so as to stimulate an increase in economic activities.
- Stringent or tight monetary policy:- it does the opposite of expansionary policy, monetary policy is said to be polices that will reduce the supply of money or increase the cost of money in the economy in order to generate a contraction in the economic activities.
Inflation on the other hand is defined by Nwankwo (1977) as increase in the volume of credit relative to available goods resulting in a substantial and containing rise in the gene real price level. He also listed the characteristic of inflation as:
- An increase in demand
- A limitation of supply
- An increase in the supply if money there is a struggle of the community for the limited supply of gavels.
Inflation has influenced Nigeria as a whole in various ways which has been controlled by monetary inflation demand pull inflation, galloping inflation and hyper-inflation.
This research project is on the rate of monetary policy in the contract of inflation in Nigeria. It seeks to find out the exact relationship (in terms of monetary policy that exists between monetary policy and inflation. The researcher does this by analyzing the data on the two variables with ultimate aim of evaluating, verifying, reflecting or modifying the stated relationship (in terms of monetary policy effect which exist between the two variables.
This project is made up of five chapter the succeeding chapter review all the literature related to the research variable. The review being exhaustive an nature provides a comprehensive insight to these variables. Thus having it possible for money lenders to be acquitted with the variable what monetary policy and inflation is all about the exhaustive nature of the literature review is made possible by the made range of books consulting prior to its complication.
Chapter three introduces the research design and methodology used is the research work, it explains the method of data collection, population and sample method of data analysis and tools used analyzing complied data.
Chapter four introduces the presentation, analysis and inter presentation of data
Chapter five summarize research project, conduction and recommendation of the research project.
1.2 Statement Of The Problem
This research work is set to know why the rate of inflation in that adopted by the monetary policy to control it also at finding out why monetary policy measures adopted the government in thus the period of 1995 to 2005 did not solve the problem of inflation in Nigeria.
1.3 Objective Of The Study
This study attempts to identify the following:
- The role of monetary policy in the control of inflation in Nigeria from 1995-2005
- To bring out problems (if any) militating against the realization of this role.
- To give recommendation where necessary for the improvement or modification of the monetary policy.
1.4 Research Questions
- Has monetary policy been effective in controlling inflation in Nigeria?
- Is the rate of inflation in Nigeria economy directly related to the supply of money?
- Has monetary policy played any role in controlling inflation in Nigeria?
1.5 Significant of the Study
It is hoped that this study would be of help and benefit to the banking industry and the inflation can be central bank of Nigeria (CBN) it center more on how inflation can be controlled, thorough monetary policy in Nigeria. This could be in form of pen market operation interest rate, improving banking policy and so on. The impact of effect of rising price of goods and services will be examined.
This studies especially the CBN of apply the most effective role of monetary policy in the central of inflation in Nigeria. The study will be to the mental horizon of the researcher to be able to embrace similar tasks in future.
1.6 Scope of the Study
This research work covers the use of monetary policy in the Nigerian economy it also shows the government through the central bank of Nigeria achieve the economic objective of the government using monetary policy. These research also went further to know how monetary policy can be used to control inflations.
1.7 Limitation of the Study
The limitations of the study are as follows:
Time: These wasnt mush time to go for further research analyze more facts because of the nature of this semester hence limiting my effectiveness and by extending my research finding.
Finance: This was the painfully problem I encountered when being for research due to the fact that didnt have enough money that could be enough for carrying out the research hence frustrating me in my effort to generate more data.
1.8 Definition Of Terms
Some terms in this study are defined to guide the readers who may be unfamiliar with the topic, monetary policy is defined as a deliberate manipulation of the cost volume ad direction of money and credit objectives.
Monetary authority: Monetary authority is defined as the machinery government that formulate and execute monetary policy on Nigeria, the monetary authority is regarded as the federal executive council, the ministry of finance and CBN inflation.
This is the continuous or intermittent rise in the price of goods & services.