MONEY SUPPLY AND ECONOMIC GROWTH IN NIGERIA

This study examined the effect of money supply on economic growth in Nigeria, covering a period of thirteen years from 2012Q1 to 2024Q4. The study disaggregated money supply into quasi money supply (QM), narrow money supply (M1), broad money supply (M2), and extended broad money supply (M3), while economic growth was proxied by Real Gross Domestic Product (RGDP). Quarterly secondary data used were sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin to capture both short-run dynamics and long-run relationships. The study employed an ex post facto research design and utilized the Vector Error Correction Model (VECM) to estimate the short-run and long-run interactions among the variables, following preliminary stationarity tests using the Phillips-Perron (PP) test and cointegration analysis via the Johansen approach. Empirical results from the VECM revealed that narrow money supply (M1), broad money supply (M2), and extended broad money supply (M3) exerted significant positive effects on Real Gross Domestic Product, while quasi money supply (QM) showed a positive but statistically insignificant impact. The Error Correction Term confirmed a convergence to long-run equilibrium at a speed of 43.1% per period. The study concluded that effective management of money supply, particularly the growth of M1, M2, and M3, is critical in stimulating Nigeria’s economic growth. It was recommended among others that the Central Bank of Nigeria pursue coordinated monetary policies that ensure steady expansion of money supply while maintaining price stability, thereby fostering sustainable economic growth in the country