Monetary Policy Thrust for Inclusive Growth in Nigeria

Abstract

Economic growth in Nigeria has taken an upward trend in the last one decade. However, the growth has been regarded as non-inclusive, given the rising rates in unemployment, poverty incidence and income inequality. Although monetary policy has a role to play in fostering inclusive growth, it has had limited influence on Nigeria’s economy due to its weak productive structure. In addition, monetary policy has managed inflation solely as a demand -pull phenomenon when, in reality, cost-push factors have activated it through the supply-side of the economy by increasing the cost of production. Increased monetary policy rate is transmitted into the bank lending rate which, in turn, is passed onto the cost of production. This cost is then passed onto the consumers in the form of high product prices. The impact is often quite significant, given the heavy reliance of producers on financial resources and services in the production process. Consequently, monetary policy should be proactive to ensure inclusive growth by re-allocating resources from one sector to another, or from one industry to another without increasing the cost of production, especially the cost of credit.