The Manufacturing Sector Impact of Monetary Policy Frameworks: Evidence from Nigeria

Monetary policy as macroeconomic tool is germane to maintain economic balances and stimulate sectoral growth. However, the channels through monetary policy influenced manufacturing sector has not been adequately explored in Nigeria. Therefore, this study was carried out to uncover the linkage between monetary policy channels and manufacturing sector output in Nigeria within the period of 1986 to 2018. The unit root result based on Augmented Dickey-Fuller and Phillips-Peron tests showed the data series are integration of level and first difference. Data were analyzed with Autoregressive Distributed Lag-Bound Co-integration dynamic technique. It was discovered from the study that, monetary policy channels determines manufacturing sector output in the long run. It was further established that, manufacturing sector output responded positively and significantly to momentary policy rate, broad money supply and inflation rate while cash reserve ratio and exchange rate had negative and insignificant relationship with manufacturing sector output in the long run coefficients with mixed effects in the short run coefficients. These results suggest that, monetary policy channels are powerful tool for influencing manufacturing sector output and promoting sectroal growth especially in the long run. Thus, it was suggested that the current monetary policy frameworks should be maintained and sustained, while cash reserve ratio of banks should be reviewed to support lending to the manufacturing sector. The growth of money supply should be adequately monitored and controlled in line with the structure of the economy. Finally, appropriate and stable macroeconomic policies should be initiated to ensure macroeconomic stability capable of supporting manufacturing sector activities.