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The Conduct of Monetary Policy
The Performance of Monetary Policy In 1999
The objectives of monetary policy in 1999 were to reduce excess liquidity in the banking system; achieve single digit inflation; market based interest and exchange rates system; stable financial sector; non-inflationary growth and favorable balance of payments position. Consistent with these objectives, the monetary, credit and trade policies set targets including various policy instruments that would help achieve them. Following the enthronement of fiscal prudence by the nascent democratic government, the harsh monetary measures were progressively dismantled later in the year and finally phased out by October.
By the end of 1999, the performance of monetary policy was mixed, the broad money (M2) grew at 31.4 percent as against the target of 10.0 percent and narrow money (M1) rose by 19.9 percent compared to the 4.1 percent targeted. Bank credit to the economy rose by 35.5 percent as against the 18.3 percent target. In addition, credit to the Federal Government grew by 57.1 percent against the 10.2 percent target; while credit to the private sector was 27.3 percent against the target of 19.9 percent. The inflation rate, however, achieved a single-digit of 6.6 percent against the 9.0 percent target and GDP grew by 2.7 percent compared with the target of 3.0 percent. On the external side, external reserves was US$1,650.0 million and the exchange rate was N98.20:US$1.