Monetary policy transmission mechanism, innovative banking system and economic growth dynamics in Nigeria

Abstract

Due to mismanagement alongside poor formulation and implementation of monetary and fiscal policies, level of economic development in Africa remains low. This study argued that African countries have great potentials to accelerate and sustain economic growth through effective monetary policies due to huge market potentials, growing population, and availability of manpower, untapped natural resources and other growth advantages provided effective policies are enacted. Against this backdrop, this study investigated the effect of monetary policy transmission mechanism and innovation in the banking system on economic growth in Nigeria. Data sourced from the Nigerian Central Bank Statistical Bulletin and World Development Indicators between 1981-2015 was engaged. The study adopted a vector auto-regression and auto-regressive distribution lag approaches for its analysis. The study revealed that, due to the large informal banking sector, monetary policies have not been effective and also supervisory and intermediary financial institutions lack dependence due to frequent government interventions.