ABSTRACT
The study examined the impact of monetary policy in stabilizing the Nigeria
economy. In the model specified inflation is the regress while cash research
requirement, liquidity ratio, money supply, minimum rediscount rate, interest rate
are the regressors. The government employs a deliberate manipulation of cost and
availability of credit and money to achieve this economic objective. The CBN
being the sole regulatory body combines measures designed to regulate the value,
supply and cost of money into economic activities. This is what we call monetary
policy (CBN Brief 1996/03). It is against this background that the research is
carried out to ascertain the effect in the use of monetary policies such as money
supply, interest rate, liquidity ratio, minimum rediscount rate, inflation rate and
cash reserve requirement to stabilize the Nigeria economy. Also to determine the
relationship that exists between the independent variables and dependent variable
from the secondary data for the period under study (1980 – 2010). The statistical
technique that will be used for this analysis is the ordinary least square technique,
with the aid of PC five 8.00 software package. It has been identified that the major
problem militating against the poor performance of monetary policy instruments in
stabilizing the economic in Nigeria is time – lags which involves policy employed
to take many months to achieve its full effects. This research recommends that
there should be a reduction in the cost of production and increase the exportation in
order to achieve the objectives of naira devaluation in Nigeria and also, central
banks should be independent and should be able to achieve its inflation targets and
the stabilization of growth rate in money supply.

CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Monetary policy is the process by which monetary authority of a country
controls the supply of the money that is monetary stock often targeting a rate of
interest for the purpose of promoting economic growth and stability.
Monetary policy measures are monetary management put in place by the
government through the central bank. These measures rely on the control of
monetary stocks, that is supply of money in order to influence board macroeconomic
objectives which includes price stability, high level of em*loyment
sustainable economic growth and balance of payment equilibrium. These board
objectives are achieved through the use of appropriate instrument depending on
which objective the policy formulated want to achieved and also on the level of
development on the economy.
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In the application of monetary policy measures as instrument of
stabilization, instrument of monetary policy are determined by the nature of the
problems to be solved and by this environment in which these problems exist.
They are broadly two categories of these instruments VIZ- indirect and direct
instruments. INDIRECT INSTRUMENT are usually used in the market based on
economic where the quality of money stock can affected through the relationship
between supply and resume money as well as the ability of the monetary authority
to influence the creation of reserved.
The reserved and hence money supply can be affected through the following
ways.
1. Deposit ratio/change in reserve.
2. Change in discount rate.
3. Interest rate change.
4. Engaging in an open market operation.
In an underdeveloped financial institution the instrument of monetary
management is largely limited to direct measure which set monetary and credit
target at desired levels. The major DIRECT control measure is direct investment
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regulation however quantitative ceiling on overall credit operation is also used.
These instruments of monetary policy are applied in the achievement of varied
objectives.
1.2 STATEMENT OF THE PROBLEMS
The Nigeria economy has encountered the problem of disequilibrium,
inability to mobilize domestic savings and unsatisfactory expansion of domestic
output. These problems have consistently and presently done severe damage to
Nigeria economy; but most strikingly these problems have continued to play the
economy unabated that is, the economy is becoming less strong. It is against the
background that the problem of this study has been identified and they are as
follows.
1. Are monetary policy measures effective as instrument of economic
stabilization?
1.3 STATEMENT OF OBJECTIVES
The objectives of the study are:
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i. To analyze the various monetary policy objectives and instrument for the
period.
ii. To ascertain the level of success of policy measures against desired objects.
iii. To identify the factors that tends to hinder the full attainment of desired
objectives.
iv. To recommend the appropriate policy measures for the achievement of
specific objectives as well as recommend solution to problem that hinders
the full attachment of such objectives.
1.4 STATEMENT OF HYPOTHESISs
The following hypothesis is been formulated to guide the study.
H0: Monetary policy measures have no impact on the economic stabilization in
Nigeria.
H1: Monetary policy measures have impact on the economic stabilization in
Nigeria