Nigeria has been pursuing techno-economic development objective since the 1962/65 development plan with very limited success. This suggests that Nigeria’s development strategy may have ignored the progenitor of modern industrial evolution. Interestingly, insights from the early canons of economic thought unequivocally demonstrated that the capital goods sector is the most strategic factor behind industrialization in general and techno-economic development in particular. But unfortunately, contemporary development literature and policy is mute on the subject. It is argued that the absence of a dynamic local capital goods sector is the key reason behind Nigeria’s import and technological dependence, high rate of unemployment and underdevelopment broadly construed. The critical importance of the capital goods sector for industrialization and techno-economic development stems from the fact that it is the hub for technological innovation, technological entrepreneurship and technological learning-by-doing. Thus, the capital goods sector gives the economy the capacity to become innovative, to become reproductive in character, to create wealth at will, to generate employment and to effectively tackle the challenges of underdevelopment. The applicability of the capital good-led growth strategy is nevertheless contingent on three preconditions (availability of investment capital, availability of absorptive capacity and willingness to invest in capital goods) which Nigeria and other large developing countries can satisfy. Conventionally and theoretically increase in money supply according to the quantity theory of money triggers a high inflation rate in developed and emerging economies. The reality in Nigeria contravenes the quantity theory of money. This study investigates the missing link in Nigeria from January 2010 to December 2018 by applying the Johansen co-integration, Granger causality tests and Vector Error Correction Model (VECM) on the monthly data. The findings indicated that money supply does not cause inflation. Inflation is caused by non-monetary factors of political instability, corruption, poor basic infrastructure among others. Money supply and inflation co-integrate in the long-term. The causality test proposed a uni-directional flow from inflation to the money supply. Bi-directional causality was not observed in this study. The VECM resulT indicated that disequilibrium caused in the previous year can converge back to equilibrium in the current year. The general findings of the study disagreed with the quantity theory of money. The study recommends that non-monetary factors of political instability, corruption, poor basic infrastructure among others were responsible for the missing link. These factors should be checked and put in perspective to achieve lowinflation at a single digit in Nigeria.
METHODOLOGY
This study used monthly time series data from the Central Bank of Nigeria‘s (CBN) Statistical Bulletin from January 2010 to December 2018 to explore the long and short-term relationship and causal link between money supply and inflation in Nigeria.
- Implicit Price Deflator to GDP: measured inflation rate and is calculated as the GDP at the current basi prices divided by the GDP at the constant basic prices. The ratio explains and accounts for the change effects of inflation on the overall prices of products and services that make up the GDP.
- Money Supply: M2 and M3 were used to investigate the dynamics of inflation. M3 included, M2, M1, M0 and liquid components of money supply that were not in circulation such as repurchase agreement and was the broadest measure of money supply in an economy. M2 consisted of all of M0 and M1 in addition to saving deposits and certificates of deposit.
- Monetary Policy Rate (MPR): The minimum rediscounted rate (MRR) served as the CBN interest rate benchmark which anchors all other interest rates in the money market and the economy, influencing the cost of funds and its direction in the economy. Gross Domestic Product: measures the rate of economic growth.
THESE THE FACTORS HINDERING NIGERIA TECHNOLOGY
- The Government does not value technology as much as they should. …
- Nigerians do not understand or trust technology. …
- The cost of running a technology company is too high. …
- It exposes corruption. …
- Nigerians do not trust things made in Nigeria.
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