Impact of Monetary Policy Instruments on Net Export in Nigeria: 1993-2023

This study examined the impact of monetary policy instruments on net export in Nigeria, recognizing that despite the implementation of effective monetary policy, the value of net export does not reflect a significant improvement. The main objective was to assess how various monetary policy channels such as; Money Supply (MS), Interest Rate (INTR), Exchange Rate (EXCH), and Foreign Reserves (FR) affect Net Export. The study utilized an Autoregressive Distributed Lag (ARDL) model to analyse time series data on monetary policy instruments and net export, employing co-integration and error correction techniques to capture both short-run and long-run relationships. The findings revealed MS had a significant but positive impact on net export in Nigeria, suggesting that an increase in money supply often leads to lower interest rates, making borrowing cheaper for businesses, thereby, stimulating investment in production, and leading to an increase in goods available for export. Conversely, INTR had a negative and significant impact on foreign trade, indicating that higher interest rates increase the cost of borrowing for businesses and consumers, leading to reduced investment and spending, including investment in production for export markets. EXCH also showed a negative and significant effect on net export, indicating that a stronger value of domestic currency decreases net export, as exported goods become more expensive for foreign buyers, reducing demand for these goods. FR had positive but significant impact on net export in Nigeria, suggesting that higher foreign reserves indicate that a country has ample resources to stabilize its currency, by implication, excessive volatility in exchange rates can be prevented. Based on these findings, specific recommendations were made to relevant institutions. The Central Bank of Nigeria (CBN) should use monetary expansions to boost exports strategically. Government policies that amplify the positive effect of money supply such as subsidies, tax incentives, and infrastructure investment should be implemented, as they have proven to support key export sectors.

Monetary Policy, Money Supply, Interest Rate, Exchange Rate, Foreign Reserves

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