The role of Central Bank of Nigeria's analytical balance sheet and monetary survey in monetary policy implementation

This paper discusses the significance of Central Bank of Nigeria's (CBN) monetary aggregates in the implementation of monetary policy. The Analytical Balance Sheet and monetary survey are shown to be useful tools in the analysis of monetary and credit developments in the economy. It also discusses the role of the aggregates in monetary policy implementation through the adjusted money multiplier, which explains how policy actions of the CBN influence the broad money supply. Finally, the paper attempts to estimate the Taylor-type monetary policy reaction function for Nigeria using the monetary policy rate and reserve money since December 2006 when the monetary policy rate was first introduced by the Bank. The paper finds that the reaction function fits the actual policy performance of real monetary policy rate and reserve money as the implied paths of the reaction functions fit the actual paths of the policy variables rather closely.