ABSTRACT
The study examined the impact of money supply on economic growth in Nigeria.
In the model specified, real gross domestic product (real GDP) is the regress while
broad money supply, real exchange rate, and real interest rate are the regressors.
Data was collected from CBN statistical Bulletin for the period 1981 – 2010. The
statistical techniques used for the analysis is the ordinary least square techniques
with the aid of Stata 10 software package. The research indicates that real interest
rate and real exchange rate in Nigeria within the period under study failed to
influence real gross domestic product while broad money supply being the only
significant regressor influenced real gross domestic product (real GDP) within the
period under study. It has been identified that the major problem militating against
the poor performance of monetary policy instruments in influencing real GDP in
Nigeria is time lags involved which now makes any policy employed by the
government to take many months to achieve its full effect. In effect to this,
effectiveness of influencing real gross domestic product in Nigeria maybe
promoted by emphasizing on broad money supply instead of on monetary target
variables due to the fact that broad money supply is statistically significant.

CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
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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 behavior of aggregate money supply experiences much
variations in their economic activities(handle 1997),others are skeptical about the
role of money on gross national income (Robinson 1950, 1952).
Evidence has shown that since 1980 some relationship exist between the
stock of money and economic growth or economic activity in Nigeria. Over the
years, Nigeria has been controlling her economy through variations in her stock of
money. Consequent upon the effect of the collapse of oil price in 1981 and the
balance of payment (BOP) deficit experienced during this period, various methods
of stabilization ranging from fiscal to monetary policy were used. Ikhide and
Alwoda (1993) concluded that reducing money stock of money through increased
interest rates would lower gross national product (GNP). Thus the notion that stock
of money varies with economic activities applies to the Nigerian economy. As
already explained money supply exerts considerable influence on economic activity
in both developed and developing economics. The low level of supply of monetary
aggregates in general and money stock in particular had been responsible for the
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fundamental failure of many African countries to attain growth and development.
Various scholars have laid much of the blame for the failure of monetary policies to
translate into economic growth on the government and its agencies as a result of
poor implementation and sincerity on the part of policy executors.
In discussing the concept of money supply and its impacts, two other issues
often come to our mind which is the state of inflationary pressure and the
unemployment rate. 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 (uzougu 1981). 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 services as possible while maintaining an
acceptable level of price stability, but this major goal will be very difficult to attain
at high inflation rate and price instabilities due to excess money supply in the
economy. This research work therefore, would review the technicalities involved in
the control of money supply in Nigeria.