Examining the Research Gap in Monetary Policy Transmission Mechanisms in Nigeria Under Alternative Exchange Rate Regimes

The effectiveness of monetary policy depends critically on transmission mechanisms, and the research gap in how these mechanisms operate under Nigeria's alternating exchange rate regimes represents an important empirical void for central bank policy design. This study examined the research gap in monetary policy transmission through interest rate, credit, exchange rate, and asset price channels in Nigeria under fixed, managed float, and free float regimes. A systematic scoping review of 11 databases identified 38 empirical publications from 2018 to 2024 on Nigerian monetary transmission, of which only 6 incorporated regime-specific analysis. Original empirical analysis used a regime-dependent VAR model to compare transmission effectiveness across exchange rate regimes between 1990 and 2023. Regime classification used the IMF Annual Report on Exchange Rate Arrangements. Results showed that the interest rate channel operated most effectively during managed float periods (impulse response of -0.42 to a monetary tightening shock). The credit channel showed significant regime dependence, with full float periods exhibiting 34 percent weaker transmission than fixed periods. Exchange rate pass-through was significantly higher in free float regimes. Asset price channel transmission was consistently weak across all regimes, reflecting Nigeria's shallow capital markets. Three critical research gaps were identified: the absence of panel state-level transmission analysis, limited work on informal sector response to monetary policy, and understudied interaction effects between monetary and fiscal policy. Recommendations include CBN commissioning state-level monetary transmission research.

Keywords: monetary policy transmission, exchange rate regimes, VAR model, Nigeria, research gap