MONETARY POLICY AND BALANCE OF PAYMENTS IN NIGERIA: A CO-INTEGRATION SCRUTINY

Abomaye-Nimenibo, Williams Aminadokiari S. &Inimino, Edet Etim

Department of Economics, Obong University, Obong Ntak, Akwa Ibom State, Nigeria.

Department of Economics, University of Uyo, Uyo Akwa Ibom State, Nigeria

Email:wasanim2006@yahoo.com, clergyedet1@yahoo.com

ABSTRACT

The study examines balance of payments and monetary policy in Nigeria from 1980 to 2013. The main purpose of the study is to examine the relationship between monetary policy and balance of payments in Nigeria. The data for the study were sourced from CBN statistical bulletin. The variables were tested for stationarity using the Augmented Dickey fuller test. Also, Johansen co-integration method was the main tool for the analysis. From the Johansen co-integration result, we discover that there are two co- integrating equations because Max-Eigen Statistical values are larger than critical values.Thus, we accept the alternative hypothesis that there is a long run relationship between balance of payments (BOP), interest rate (INT), money supply (MS) and government expenditure (GEX). Meaning that,uninterrupted, appropriate and suitable monetary policy has the ability to solve balance of payments problem in Nigeria. Based on the above findings, the paper recommends that monetary policy should be complemented with an effective fiscal policy to improve the Nigeria’s balance of payments situation.