The monetary control instrument most effectively used by the Central Bank of Nigeria is the
Answer Details
The monetary control instrument that is most effectively used by the Central Bank of Nigeria is the Open Market Operations (OMO). Open market operations refer to the buying and selling of government securities by the central bank in the open market. By doing this, the central bank is able to influence the supply of money in the economy, which affects the level of interest rates. When the central bank wants to reduce the money supply and increase interest rates, it sells government securities in the open market, thus reducing the amount of money available to banks to lend. Conversely, when the central bank wants to increase the money supply and lower interest rates, it buys government securities, thereby injecting money into the economy. Compared to other monetary control instruments like margin requirement, reserve ratio, and discount rate, open market operations are more effective and flexible in controlling the money supply in the economy.