The Potential Impacts of Financial Literacy on the Economy through the Formulation and Implementation of Monetary Policy by Central Bank of Nigeria

International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue VIII, August 2020 | ISSN 2454–6186

The Potential Impacts of Financial Literacy on the Economy through the Formulation and Implementation of Monetary Policy by Central Bank of Nigeria

Chief Ajugwe, Chukwu Alphonsus Ph.D.

Abstract: Financial Literacy being the potent tool that drives the economy is quite necessary in the transmission of monetary policy outcome to the economy. The cardinal argument is that if the economic actors are not financial literate, they will be incapable of the interpreting and having in-depth understanding of the monetary policy frameworks as enunciated by monetary authorities. Financial literacy serves also as a strategic weapon for making positive and efficient investments by consumers and organizations which makes the critical sectors of the economy to get the required boast.
The success of the Financial Literacy will not only have profound impact on monetary policy but also on financial inclusion which will make it possible for every eligible adult to open bank account, in order to access all the banking services such as savings, deposits, loans and avail themselves to Information Communication Technology (ICT) as well. It is imperative to state that it will be accompanied with additional benefits such as e-banking and the use of Automatic Teller Machines (ATMs) which assured speedy transaction and convenience to consumers and the banking industry. In reality financial literacy is not only pivotal for financial inclusion but a critical component in providing strategic lead in achieving financial stability and cashless policy which generates multiple advantages both to the customers and banks alike because of its cost minimization and convenience .
The paper will examine in-depth the monetary policy and financial literacy, a robust approach on the impacts of both the financial literacy and monetary policy as being formulated and implemented by the monetary authorities will be undertaken. In addition the challenges, recommendations, and the conclusions will be critically analyzed.

I. INTRODUCTION

One of the core mandates of Central Bank of Nigeria (CBN) as contained in the CBN Act, 2007 as amended, is to ensure monetary and price stability, to this end, the CBN formulates and implements suitable monetary policies to grow a sustainable economy. According to Wikipedia (2020) Monetary Policy is policy adopted by the monetary authority of a country that controls either interest rate payable on a very short-term of borrowing or money supply, often targeting inflation or interest rate to ensue price stability and general trust in the economy.

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