Monetary authorities in Nigeria consist of the central bank of Nigeria (CBN) and the Federal Ministry of Finance. The central bank promotes and maintains monetary stability and supervises the activities of other banks, together with the Nigeria Deposit Insurance Corporation (NDIC). Over the years, the central bank has relied on the direct instruments of monetary control as a means of stabilizing the economy. This implies the use of credit ceiling and sectoral credit allocation.

            In general terms, monetary policy refers to a combination of measures designed to regulate the value, supply and cost of money in an economy; in consonance with the expected level of economic activities (Okwu et al, 2011; Adesoye et al, 2012). For most economies, the objective of monetary policy includes; prize stabilities, maintenance of balance of payments equilibrium, promotion of employment and output growth and sustainable development (Folawewo and Osinubi, 2006). These objectives are necessary for the attainment of internal and external balance of payment equilibrium and the promotion of long – run economic growth and development.
            The importance of prize stability derives from the harmful effect of prize volatility which undermines the ability of policy makers to achieve other laudable macroeconomic objectives. Infact there is a general consensus that domestic prize fluctuation undermines the role of money as a store of value and frustrates investments and growth (Ajayi and Oyo, 1981; Fischer, 1994) on inflation, growth and productivity have confirmed the long-term inverse relationship between inflation an economic growth. With the achievement of price stability, the conditions in the financial market and institutions would create a high degree of confidence, such that the financial infrastructure of the economy is able to meet the requirements of market participants.
            The economic environment that guided monetary policy in Nigeria before 1986 was characterized by the dominance of the       oil sector, the expanding role of public sector in the economy and over-dependence on the external sector. The introduction of Structural Adjustment Programme (SAP) in July 1986 as the most viable option towards tackling the problem of the economy.
            The establishment of CBN in 1st July 1959 it has continued to play the traditional role expected of a central bank, which is the regulation of the stock of money in such a way as to promote the social welfare (Ajayi, 1999). This role is anchored on the use of monetary policy that is usually targeted towards the achievement of full-employment equilibrium, rapid economic growth, price stability and external balance of payment (Adesoye et al, 2012). (Over the years, the major goals of monetary policy have often been the two later objectives). Thus, inflation targeting and exchange rate policy have dominated CBN’s monetary policy focus based on the assumption that these are essential tools of achieving macroeconomic stability (Aliyu and England 2009).
            Indeed, an instable or Crisis–ridden financial sector will render the transmission mechanism of monetary policy less effective; making the achievement and maintenance of strong macroeconomic stability/goal difficult or unrealistic. Especially, in this period of high inflation, where the horizon of investors is very short and resources are diverted from long–term investment to those with immediate returns. If, this is prevalence in the economy stagnating in the nearest future as witnessed in the period between 1991–1994 in Nigeria.

            One of the major objectives of monetary policy in Nigeria is price stability. However, despite the various monetary policies/measures adopted by the central bank of Nigeria (CBN) over the years, inflation still remains a major threat to Nigeria’s economic growth.
            Nigeria has experienced high volatility in inflation rate. Since the early 1970s, there have been four major episodes of high inflation trend excess of 30 percent. The growth of money supply is correlated with high inflation episodes because money growth was often in excess of real economic growth.
However, preceding the growth in money supply, some factors reflecting the structure charactistics of the economic are observable. Some of these are supply stock, arising from factors such as famine currency devaluation and changes in terms of trade.  
            The first period of inflation in the 30% percent range (12 mouth moving average) was in 1976 (CBN, 2009) one of the factors often adduced for this inflation is the drought in Northern Nigeria, which destroyed Agricultural production and pushed up the lost of agricultural products, a significant increase in the proportion of the average consumer’s budget.
In addition, during this period, there was excessive monetization of oil export revenue, which night have given the inflation a monetary character.
            In addition, in the late 1980s, following the SAP, the effect of wage increase created a cost-push effect on inflation. In 1984, inflation peaked at 39.6 percent at a time of relatively little growth in the economy. Over the same period, excess money growth was about 43 percent and credit to government had increased by over 70 percent (CBN, 2010).
            The main thrust of this study is to evaluate the effectiveness of CBN’s monetary policy over the years. This would go along way in assessing the extent to which the monetary policies have impacted on the growth process of Nigeria using the major objective of monetary policy as yardstick. In this regard, this study will attempt at investigating instruments has gone on the achievement of price stability in Nigeria. 

The researcher has formulated the following research question to guide the study; 
1.         What is the trend of monetary policy in Nigeria?
2.         Have these monetary policy instruments had any impact on price stability in Nigeria and to what extent?
3.         How far has the central bank and monetary authorities in Nigeria gone in the implementation of monetary policies in Nigeria?

1.4                   OBJECTIVE OF THE STUDY
            The broad objective of this research work is to investigate the significant impact of monetary policies on price stability in Nigeria’s economy. However, the specific objectives of this research work are as follow;
1.         To examine the trend of monetary policy and its instrument in Nigeria,
2.         To examine if these policy instruments have had any impact on prize stability in Nigeria and to what extent,
3.         Evaluate the performance of the monetary policy instrument in Nigeria over the period under review.

This study will he guided by the following hypothesis:
Ho: Monetary policy does not have significant impact stability in Nigeria.
Hl: Monetary policy has a significant impact on price stability in Nigeria.

            This study is significance in the following ways:
1.         It would also provide an objective view of the effectiveness of the monetary policy in Nigeria;
2.         The study would also provide an econometric basis upon which to examine the effect of monetary policy on the Nigerian economy.
3.         Lastly, it would provide policy recommendations to policy – makers on ways to make the Nigerian economy vibrant through the monetary policy.
            This study will also provide other alternative policy measures. Although the monetary authority has suffered from concatenation of political attenuation since its implementation, but its importance and need for improvement cannot be over emphasized in the Nigeria economy.

            The economy is a large component with lot of diverse and sometimes complex parts. This study will only focus on major growth component such as the gross domestic product, price level, exchange rate and the balance of payment equilibrium. This study will cover all the facets that make up the monetary policy (Direct and Indirect), but shall empirically investigate the effect of the major ones. The empirical investigation of the impact of the monetary policy on the price stability variable in Nigeria shall be restricted to the period between 1981 and 2011.
            The research work as limited by lack of adequate physical direct information and statistic, lack of adequate finance and time constraints; as the researcher is a student who combines this study with his academic work.
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