THE IMPACT OF MONEY SUPPLY ON NIGERIAN ECONOMIC GROWTH (A CASE STUDY OF CBN, ILORIN KWARA STATE)

CHAPTER ONE:

INTRODUCTION

1.1 Background to the study

The relationship between money supply and economic growth has been receiving increasing attention than any subject matter in the field of monetary economics in recent years. Economists differ on the effect of money supply on economic growth. while some agreed that variations in the quantity of money is the most important determinant of economic growth and that countries that devote more time to studying the behaviour of aggregate money supply experiences much variations in their economic activities about the role of money on gross national income.

The supply of money affect economic activity of a country, the low level of supply of monetary in general and money stock particular has been responsible for the funder mental failure of many Africa countries to ascertain growth and sustainable development in term of economic, various scholars have laid down a lot of blame for the failure of monetary policies to translate economic growth on the federal government and its agencies due to poor implementation on part of policy makers. According to the monetarist, an increase in money supply in an economy causes an increase in general price level of commodities which brings about inflationary in the country.

Also related to the issue of inflation is the issue of unemployment which is the primary goal of any economy so as to produce as many goods and service as possible while maintaining an acceptable price level stability, but thus major goal will be very difficult to attain at high inflation rate and price instabilities due to the reason of high supply of money in the economy.

This paper therefore aims to determine how much contribution has money supply contribute to GDP in Nigeria.

1.2 Statement of problem:

A study of this nature is always necessitated by the existence of certain problems. The major problem that trigged off this work is the recurrence of general price instability, persistent inflationary pressures and unemployment in the economy, in spite of the plethora of monetary policy measures adopted and applied over the years. There is also this problem of general feeling that a continuous annual rate of money increases will adversely increase the rate of price level which will directly lead to inflation, which may deny the intended effects of use of monetary policy measure to influence economic growth thus, requiring a policy response.

Recently, these inflationary pressures have succeeded in bringing about devaluation in Nigeria’s currency value as a result of expansionary measures of money supply. From the above issues, this research work will address and concentrate on and determines the relationship between money supply and Nigeria gross domestic product GDP.

1.3 Objective of the study:

The main objective of this study is to determine the impact t of money supply on Nigeria economic growth in Nigeria, while other specific objective includes:

1. To determine the factors affecting adequate money supply to the economy of Nigeria.
2. To ascertain the relationship between money supply and Nigeria GDP.

1.4 Research questions:

1. What is the relationship between money supply and Nigeria GDP?
2. What are the factors militating against money supply in the Nigeria economy?

1.5 Statement of hypothesis:

H0₁:  there is no significant relationship between money supply andgross domestic product (GDP) of Nigeria over the years.

H0₂: there is no significant impact of money supply on Nigerian economic growth.

1.6 Significance of the study:

This research work paper will provide clearly vital information to the students, policy maker, the federal government and corporate entity in areas relating to monetary policy, the quantity of credit to be given out and economic growth stabilization and sustainability of growth that can lead to economic development, the implication of this is not farfetched as research in the field could lead to a paper and more focused policy formulation, which will produce, lead to better outcomes.

1.7 Scope of the study:

This project paper relied on primary and secondary data [existing data].  The secondary data for this study of which the sources are the central bank of Nigeria [CBN] statistical bulletin 2014 and it measure 1981 to 2014.In this project paper, we will examine and appraise the stock of money supply and its impacts with regards to growth in Nigerian economy using the GDP [the gross domestic product], inflation, export, import, and other determinant of economic growth as an indicator to measure the economic growth.

1.8 Limitation

Essentially, there are some challenges faced in carrying out this research study which make it to limit the work of the researcher. The following are some of the limitations:

Time constraint: The time being allocated to carry out this research study is insufficient within the time frame. There is limited time to carry out this research work due to some other academic reading, assignment, test, exam etc.

Financial constraint: One of the problems encountered this project work is insufficient fund, due to the fact that I am a student no enough money to expand or go into deep of this project work.

Secrecy of data: the data are of official in nature, so it is not made for public consumption, it involve privacy, so it had a little bit to get accurate data. The data are limited to 2014, no 2015 and other to further.

1.9 Research methodology:                                   

Primary and secondary data are usually used in the various research works, primary data are new data collected through various instrument like questionnaire, focus group, interview, and sample e.t.c. Secondary data are existing data sourced from textbook, online internet, journal etc. In this research work, both primary and secondary data will used. Data will be source from CBN of Nigeria to carry out the project.

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