TITLE:
Monetary Policy Transparency: Evidence from Central Bank of Nigeria (CBN)
AUTHORS:
Aminu Yusuf Usman, Umar Salisu
KEYWORDS:
Monetary Policy Transparency, CBN, MPC, Eijffinger-Geraat Index
JOURNAL NAME:
Modern Economy,
Vol.7 No.10,
September
9,
2016
ABSTRACT: The idea of transparency in monetary policy has
gained significant attention in the last two decades both in the academia and
Central Banking Circle. As such, a number of Central Banks in the World, CBN
inclusive subscribed to the trend toward a more transparent monetary policy framework.
The degree of transparency is claimed to vary across Central Banks and monetary
policy framework. Therefore, its effects may likely vary. This study measures
monetary policy transparency using the case of Nigeria’s apex Bank (CBN) by
employing the Eijffinger and Geraat (2006) Index. We based our analysis on
information provided by CBN from 2007-2015. The result indicates that CBN had a score of 11 out of 15 points.
Considering the aggregate score, CBN can be regarded as being transparent in
its monetary policy. However, looking at specific transparency dimensions, it
is clear that CBN exhibits weak performance in
the economic and operational dimensions which constitute important aspects of transparency. The release of accurate data on key economic variables and
disclosure of policy models used for policy analysis would enhance the process
of coordinating private agents’ expectation
toward fundamentals as well as strengthen their confidence on the monetary authority, thereby boost credibility.
We recommend on this basis for CBN to partner with National Bureau of
Statistics to gain access to data on unemployment
and capacity utilization and on more frequent manner. This paper generally
recommend that CBN should explicitly provide wide-ranging and accurate
information on monetary policy, data on key variables relevant for policy
decisions and macroeconomic model used for
policy analysis in a timely and more frequent manner.