Monetary Policy and the Performance of the Crude Petroleum and Natural Gas Sector in Nigeria (1986-2017)

Abstract

This study examined the effect of monetary policy on the performance of the Crude Petroleum and Natural Gas sector output in Nigeria. The explanatory variables are monetary policy rate, Treasury bills rate, Cash reserve requirement and money supply; while the dependent variable is the Crude Petroleum and Natural Gas (PEGAS) sector output. The study adopted an ex-post facto research design and used secondary data obtained from the CBN Statistical Bulletin. The study covered a period of 32 years (1986 to 2017). The data were subjected to Augmented Dicker Fuller stationarity test to determine the best suitable econometric tool of analyses. The Autoregressive Distributive Lag (ARDL) was used for data model estimation. The results revealed that: monetary policy tools have no significant effect on the crude petroleum and natural gas output, both in the long and short run; that of all the monetary policy variables in the model, only money supply (M2) has a significant short run effect at the first lag period [M2(-1)]. The study thus concluded that monetary policy has not been an effective long run policy instrument that can largely influence the crude petroleum and Natural Gas sector output in Nigeria. The study recommends that the CBN use expansionary monetary policy that can increase money supply to the PEGAS to boost output indirectly. The study introduced model for the Crude Petroleum and Natural Gas sector output and monetary policy nexus in Nigeria.