AN EMPIRICAL ANALYSIS OF MONETARY POLICY INSTRUMENTS AND ITS EFFECT ON INDUSTRIAL OUTPUT IN NIGERIA

This study investigates the effect of monetary policy on industrial sector output in Nigeria, with a focus on the role of key monetary instruments. The specific objectives were to: (i) examine the effect of the Monetary Policy Rate (MPR) on industrial sector output; (ii) evaluate the impact of the Treasury Bill Rate (TBR); (iii) ascertain the influence of the Cash Reserve Ratio (CRR); and (iv assess how the broad money supply (MS) relative to GDP affects industrial performance. The study employed the Ordinary Least Squares (OLS) estimation technique alongside residual-based and parameter stability tests, using annual time-series data for the period under review. Findings revealed that MPR, TBR, and CRR each exerted insignificant effects on industrial sector output, with p-values of 0.91, 0.052, and 0.488 respectively, indicating weak or no statistical influence. In contrast, broad money supply (p-value = 0.046) demonstrated a positive and statistically significant relationship with industrial output, underscoring the importance of liquidity expansion in stimulating industrial growth. These results imply that while rate-based monetary tools remain ineffective in driving industrial performance, policies that enhance money circulation and credit availability have a stronger impact. The study recommends that the Central Bank of Nigeria (CBN) strengthen the monetary transmission mechanism, restructure the treasury bill market, adopt a flexible reserve policy, and sustain liquidity-oriented interventions to support productive investment. Overall, the findings highlight the need for a balanced, growth-driven monetary framework that promotes credit access, industrial competitiveness, and sustainable economic development in Nigeria.