Naomi Aimalohi AKHIGBE

This study delves into the intricate relationship between currency hoarding, monetary policy, and inflation within the context of Nigeria for the periodof 1990to 2020. It aims to ascertain if there is a relationship between currency hoardingand inflation in Nigeria and also examine how currency hoarding af ects therelationship between monetary policy and inflation in Nigeria. The study wouldbeof utmost significance to student and other researchers who are interestedinunderstanding how currency hoarding af ects the relationship between monetarypolicy and inflation in Nigeria. It focuses on unravelling how changes in currencyin circulation, interest rates and money supply impact inflation dynamics. Themethodology employed is the Error Correction Model (ECM), analysingdataspanning the years 1990 to 2000. Findings reveal crucial insights. CurrencyinCirculation as a percentage of GDP (CPG) is positively related to inflationrate(INF), signifying that an increase in CPG contributes to inflationary pressures. Conversely, interest rates (INTR), exhibits a statistically significant negativerelationship with inflation, with higher interest rates acting as a counterforcetoinflation. However, changes in money supply (MS) shows no significant impact oninflation. The interaction term (CHMP) was found to have minimal impact oninflation. Policy recommendations drawn from these findings emphasizeabalanced management of currency in circulation to avoid excessive inflation, continued use of interest rates as an ef ective tool for controlling inflation, diversification of monetary policy tools, and the adaptation of holistic economicpolicies. Improved data collection and research, exchange rate management, andtransparent communication are also highlighted as critical factors for ef ectivelyaddressing inflation in Nigeria. In summary, this study uncovers the multifacetednature of inflation dynamics in Nigeria and provides valuable guidance for craftingcomprehensive policies to manage inflation in the nation.