Nigeria Monetary Policy Rate (MPR) and Monetary Policy Committee (MPC): Who is Fooling Who?

Using quarterly data ranging from 2008Q1 to 2019Q4, this study empirically analysed the effect of the monetary policy rate (MPR) on some selected macroeconomic variables in Nigeria, including real gross domestic product (RGDP), inflation proxy by consumer price index (CPI), and exchange rate (EXR). Both Augmented Dickey Fuller (ADF) and Philip Perron (PP) preliminary test results showed that the data are all stationary after first difference. Toda-Yamamoto granger causality and the Autoregressive Distributed lag (ARDL) model were used in the analysis.The ARDL was used to see if there was a long-run relationship between the variables under investigation, while the Toda-Yamamoto granger causality was used to see if MPR affected the selected macroeconomic variables in Nigeria. The findings show that MPR and RGDP, CPI, and EXR have a long-run relationship, but the effect of MPR on macroeconomic variables is greater in the long run than in the short run; the Toda-Yamamoto causality result indicates that MPR has little or no impact on macroeconomic variables in Nigeria. The findings indicate that monetary policy in Nigeria has a modest effect on the macroeconomic variables studied.This means that if MPC fulfils their position of proper MPR implementation, MPR will have a greater effect on the study's selected variables. As a result, if MPR does not produce the desired result, it is assumed that MPC is deceiving MPR. According to the report, the government should ensure that the monetary policy rate, which is the beach-mark rate, is strictly followed in order to achieve the macroeconomic goals of price stability, stable exchange rates, stable economic growth, full employment, and balance of payment equilibrium.3

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