Monetary Policy and Balance of Payments in Nigeria

One of the stylization policies with which the government of Nigeria manages the economy is that of monetary policy. Monetary policy formulation in Nigeria is usually targeted at achieving some macro-economic objectives amongst which is equilibrium in the country's Balance of Payments (BOP). Thus, this paper measured the relationship between balance of payment and monetary policy adopted in the country, using Ordinary Least Square (OLS) technique of multiple regression models with statistical time series data from 1980-2015. The estimated result shows a positive relationship between the dependent variable (Balance of Payment) and the independent variables (Money Supply, Interest Rate and Exchange Rate). Specially, Money Supply and Interest Rate had significant relationship with Balance of Payments whereas Exchange Rate was not statistically significant. Based on the results, were commend that the government should promote the exportation of Nigerian products, especially the non-oil products, as this will bring in more foreign exchange to the country, boost productive activities and improve the balance of payments position of the country. Also, the Central Bank of Nigeria should ensure that the monetary policies adopted in the country are complemented with effective fiscal policies to foster economic growth and development in the Nigerian economy