ABSTRACT
Nigeria’s economic growth has been significantly impeded by recurring episodes of economic depression over the years. This study aimed to investigate the effects of monetary policy on manufacturing and agricultural output, utilizing annual data spanning from 1986-2020. Two separate models were employed, one for manufacturing output and another for agricultural output. The dependent variables in each model were manufacturing output and agricultural output, respectively, while the independent variables consisted of broad money supply (M2), financial deepening (FD), loan to deposit ratio (LTDR), inflation (INF), and government expenditure (GOVEX). The study initiated its empirical analysis by conducting a preliminary test to ensure data stability, followed by the Auto-Regressive Distributed Lag (ARDL) bound test for both models. Additionally, the study confirmed the non spuriousness of the ARDL results by performing a post-diagnostics test. The ARDL results revealed that in the short run, M2, FD, and LTDR had insignificant effects on MAN, while INF had a positive and significant effect, and GOVEX had a positive but insignificant effect. In the long run, M2 and FD had a negative and insignificant effect, while LTDR, INF, GOVEX had positive impacts on MAN with INF and GOVEX having significant impacts. For agricultural sector output (AGVA), LTDR and M2 had positive but insignificant effects in the short run, while FD had a negative and insignificant effect. GOVEX had a positive and significant effect on AGVA. In the long run, M2 and GOVEX had a positive and significant effect, LTDR had a positive but insignificant effect, FD had a negative and significant effect, and INF had a negative and insignificant effect on AGVA. The study concluded that monetary policies have varying effects on manufacturing and agricultural output, and recommended prioritizing credit to private sectors for agricultural growth and exploring alternative tools for driving manufacturing sector output.
