Impact of Money Supply On Economic Growth in Nigeria

This research examines the impact of money supply on economic growth in Nigeria using quarterly data from 1993Q1 to 2022Q4. The properties of the data were first checked using both descriptive statistic and unit root tests to avoid spurious regression. Based on that, the research has used the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests with trend and intercept. The results of unit root tests found that the variables were mixture of integration processes as some were stationary at level while others were stationary at first difference. This justified for the use of Autoregressive Distributed Lag (ARDL) model. The result of bound test revealed that, the variables under study are co integration in the long run. Also, findings showed that, both in the short run and long run, Money Supply has a positive impact on economic growth in Nigeria, while Monetary policy rate (MPR) and exchange rate (EXCR) are statistically significance and have a negative impact on economic growth in Nigeria in the long run. The result from granger causality test revealed the presence of bidirectional causality between money supply and economic growth in Nigeria, while there is unidirectional causality between monetary policy rate (MPR) and economic growth, exchange rate (EXCR) and economic growth, running from MPR to economic growth and EXCR to economic growth in Nigeria respectively. The study recommends that, government should take necessary policies that will make sure adequate money in the economy by using both monetary and fiscal policies in the country. Also government should reduce the level of monetary policy rate (MPR) as it has a negative effect on economic growth in Nigeria.