Abstract:

Monetary policy tries to ensure price stability and adequate employment which in turn will create a stable macroeconomic environment for economic prosperity. It is of great concern to policy makers that monetary policy permeates deeply into the real sector to engender economic growth. The major objective of this study is to explore the monetary policy effects on the Nigerian stocks market over time. . The Phillip Perron (PP) unit root test was the method used to test stationarity of the variables while the Johansen Co-integration approach was conducted to test for long run relationship between the variables used. In addition, the Fully Modified OLS was used to evaluate the influence of independent variables on the dependent variables in the long run. The study found that Monetary Policy Rate, Broad Money Supply and Per Capita Income have significant long run relationship with the development of the Nigerian Stock Market. It therefore recommends among others that the monetary authority in Nigeria (CBN) should as matters of practice operation a long term monetary plan that allow the monetary policy rate to be constant over a long period of time. Also, the constant mobbing up of money after an expansionary monetary policy by the CBN should be discourage since it create instability in the money market making other money rates to be unstable and compound the volatility rate of the country’s stock prices. Finally, the gap between The CBN targeted broad money and actual broad money growth should be curtail by reducing the frequency of its mob ups which usually send wrong signals to investors in the stock market.