Monetary policy, Monetary policy framework, Dollarization, currency board, Inflation targeting.


As a country's monetary authority, a central bank is responsible for the conduct of monetary policy. This onerous process begins with developing a plan of action of employing interest rates or controlling the money stock to influence the economy. The focus of monetary policy is to safeguard the value of the domestic currency in terms of what it can purchase as a basis of providing a framework for the achievement of wider government economic objectives of non-inflationary economic growth, employment, stable exchange rate, favourable balance of payments and more generally a stable financial environment for the economy. In view of the importance of nominal anchor in the conduct of monetary policy, this paper examine in details nominal anchors available to a central bank in achieving its core mandate. Ancillary to this is the examination of the nominal anchor employed by the Central Bank of Nigeria in the recent past and proffer the way forward as the nation's monetary authorities prepare for migration to inflation targeting framework of monetary policy. Following this introduction, this article presents some conceptual and theoretical issues on conventional and unconventional monetary policy framework. It also examines the choice of nominal anchor by the Central Bank of Nigeria in its different regimes of monetary policy. The following policy recommendation were proffered; Monetary Authorities' Communication with the Market, Data integrity and Currency, Fiscal and Monetary Policy Coordination and Harmonization, Effective Surveillance of the Banking System, Deepening the Banking System, Good Corporate Governance and Risk Management. ln this paper, the various nominal anchors available to a central bank as well as the conditions under which each could be optimally utilized were examined. The performance of monetary targeting as nominal anchor in the Central Bank of Nigeria was found to be mixed with relatively better outcomes in the 2002-2007 period. The development was due to deployment of ICT and other market infrastructural development that facilitated improvement in the interbank money market structural and technological changes in the economy as well as financial sector innovation have significantly weakened the hitherto assumed Jinxed money-income or money-inflation relationships, while the nominal anchor is less clear to market participants and the general public.

Author Bio

The Author is a staff of the Central Bank of Nigeria.

Publication Title

CBN Bullion






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