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The Conduct of Monetary Policy
The Performance of Monetary Policy In 1994
The objectives of monetary policy in 1994 followed government’s broad macroeconomic goals which included among others, to restore macroeconomic stability, stimulate growth in the productive sectors and generally improve confidence in the Nigerian socio-economic environment. Monetary policy focused on the use of market driven instruments and as in the previous four years, the effectiveness of monetary policy was hindered by the pursuit of expansionary fiscal policy.
The outcome of monetary policy was affected by administrative controls which involved the fixing of basic prices such as interest rate and exchange rate at below market levels. The performance of the economy deteriorated in 1994 owing to the disruption caused by the prolonged political crisis and macroeconomic instability, arising from government’s policy of guided deregulation. GDP grew by 1.3 percent, while the inflation rate reached an all time highest of 57.0 percent, Nigeria’s external reserves stood at US$1.66 billion at the end of the year and narrow money (M1) increased by 47.89 per cent compared with a prescribed target of 21.4 per cent, while broad money grew by 39.1 per cent.