Reassessing monetary policy effectiveness in Nigeria's structural economy

Abstract

This study reassesses the effectiveness of Nigeria's Monetary Policy Rate (MPR) as a stabilisation tool within a structurally constrained economy. The study adopts a qualitative analytical approach, synthesising macroeconomic data, policy documents, and theoretical insights. Drawing on data from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), and international sources covering 2015–2025, the analysis reveals that aggressive monetary tightening, raising the MPR to 27.5 percent has had limited success in curbing inflation, driven mainly by supply-side shocks, exchange rate volatility, and fiscal imbalances. The findings show that while higher MPR levels help moderate demand-pull inflation, they also dampen GDP growth, reduce credit availability, and constrain real sector performance, particularly in agriculture and manufacturing. Empirical evidence and comparative global experiences indicate that the efficacy of MPR adjustments depends on complementary structural reforms, fiscal discipline, and institutional credibility. The paper concludes that coordinated fiscal-monetary strategies, improved communication, and selective easing, supported by structural and financial market reforms, are essential for enhancing policy transmission, achieving macroeconomic stability, and fostering inclusive growth in Nigeria.