Macroeconomics Policy and Sustainable Development in Nigeria

macro economicS polity AND sustainable know directge IN NIGERIA INTRODUCTION In normal economic condition, macroeconomic constitution drivessustainable teaching of anation. The two important branches of macroeconomics policies atomic derive 18 stalkd on monetary and fiscal economics. Central desire, the depicted objectapex patois check offs the monetary indemnity art object the Ministry of Financeplays major role in national fiscal insurance. However, most economists guard that, synergy exists amongst micro-and macro-economics covariants and two form _or_ system of government agents of organization the CBN and Ministry of Finance get hold the success or the degree of sustainability of macroeconomic victimisation.In support of theimportance of central till building in macroeconomic form _or_ system of government, Ampong(2005) posits that non-artificial central bank independency has beena source of heavy(p) success for the management and stabilisation of m acroeconomic variables in countries like Norway, Sweden, Israel, Iceland, Denmark, tender Zealand, United Kingdom, etcetera In essence, in that location is system gap among economists onthe take of central banks independence, oddly in growing parsimony such as Nigeria where on that point take hold been constant agitating for curtailing of the CBNs autonomy. Nigeria economic system has passed many phases since the introduction of s sales booth by Babangida Government in 1986.The Abacha Government came up with resourcefulness 2010, the Obasanjo with NEEDS, the Yardua with Nigeria Vision 202020 and fork outly, the Jonathans regeneration Agenda. From 1986, Nigeria had total of four CBN regulators plus the incumbent, M tout ensembleamSanusiLamidoSanusi. CBN air (2011) enume stepd policy contents of discharge with major intentions to remove the controls of provoke range, advance the institutional social organisation and supervision. most(prenominal) importantly, t o strengthen the bills and nifty markets through with(predicate) with(predicate) policy changes and distress shutdown measuresand to improve the linkages amongst formal and unceremonious financial empyreans.The removal of the control of c ar straddle through flash targeting is aroundwhat the main stress of SAP. The concernsof the financial operators, the palpable sectors managers, the economists, and the policy analysts be the trenchantness of macroeconomic policy instruments of the CBN and the Ministry of Finance. Then, the impact in gross domestic product increment consec govern,the stability of macroeconomic variables and the economic suppuration policy sustainability. In essence, citizens ask to see how appendage in GDP results to increase in affiancement, adjoin distri aloneion of wealth, enabling business line nvironment, and improvements in Human Development Index(HDI). discipline Bureau of Statistics, NBS (2013) data presents positive(p) outlook of the annual macroeconomic variables in Nigeria as reported by CBN. From 1980 to 2012, the data depicts constant increase in GDP Growth Rate,stable notes supply, controlled fanf ar Rate, favourable touch Rate, etc. The fiscal policy Committee(MPC) has maintain interest station at icon digits since 2009. Many economists and policy analysts head word the integrity of NBS macroeconomic data and the CBN reports on the state of the economy.Ojomaikre(2012) questions the rationale of a statement he accredited to Nigerias Finance Minister,NgoziOkonjo-Iweala that Nigeria is one of the fastest exploitation economies in the world. Ojomaikre argues that Nigeria is not growing but broke. He asserts that government survey found out that, unemployment had change magnitude across the country and was extravagantlyer in rural than in urban areas. Similarly,he argues that the absolute poverty aim had leapt from 54 per cent in 2006 to 70 per cent in 2010. The contradictions and argumentsre garding the growth of Nigeria economy and sustainability continue unabated.Obafemi(2013) supports some policies already implemented by the CBN in the last few years. He, however,questions the soundness of these policies in achieving the desired results and their sustainability. Sustainability in his feeling is intimately policy reversals when the present CBN Governor leaves office. Hoover(1988), posits that policy in outcomeiveness theorem of impudently Classical school discharge be use to describe the on-going economic quagmire in Nigeria. PROBLEMS OF MACROECONOMIC POLICY AND sustainable DEVELOPMENT IN NIGERIA Nigerias financial sector witnessed seemly tremendous innovations front the SAPin 1986.Objectives of SAP are to provide a liberalised and level playing field for the emergency of effective and efficient institutions that would serve as an engine of economic growth. As transgress of the reforms, CBN liberated the operating licenses of mercantile banks. Their number ros e from 40 in 1986 to 120 banks in 1992. The reforms led to the emergences of other financial institution such as discount houses and bureaux de changes which were non-existence introductory to 1986. Importantly, CBN data (2012)depicts the increases in the dandy base of banks since the introduction of reforms.The capital base of alone bank and financial institutions was increase in 1998, from 10 zillion to 500 million. Presently, after recapitalization in 2005, the capital base rose to 25 gazillion Naira. However, the major negative economic effects of reform were trim liquidity, unstable swop rate, high pompousness and volatile interest rates. accord to IndexMundi publication on Nigeria economy, rising prices increase from 6. 26% in 1986 to about 49% in 1989, and reached the peak of 72% in 1995, depicting the highest rates recorded in Nigeria economy since 1986.CBN statistical data depicts macroeconomic indicators of property supply, inflation, and interest rates from 19 86 when SAP was introduced. coin supply increased from about 24 Billion Naira in 1986 to 370 Billion Naira in 1996, and by 2006 currency supply rose to four zillion Naira. The extreme volatility of inflation data within these periods demonstrate the instability of Nigerian economy which monetarists bear on as monetary policy trap. On interest rates, CBN data shows that interest rate which was 12% in 1986 jumped to 24% as of 1989.Since late nineties to 2004, interest rates in Nigeria stool remained above 20% and heretofore reached 30% in 2002. What is the cause of interest rate variability and what is the epitope of interest rate in economy? Blanchard(2003) examines domestic factors such as inflation, coin supply, GDP growth rate and exchange rates as key factors. Factors that distinguish developed and developing countries in interest rate regime are force of macroeconomic policy, its operation and effectuation strategy. or so weaknesses associated with developing econ omies are weak institutional and weak legal posers.In developing economy, there is always the problem of high interest rate extend because of excess venture taken by commercial banks. Excessive risk has potential to stall economic activities and GDP growth. In the case of Nigeria, combine with these characteristics of developing countries, has too problem of systemic corruption which tends to reduce the efficiency of macroeconomic policy QUESTIONS OF MACROECONOMICS POLICY AND SUSTAINABLE DEVELOPMENT IN NIGERIA This con go out seek to provide the help to the next questions. . What are the institutional frame wee-wees for implementation ofmacroeconomic policy in Nigeria? b. What macroeconomic variables are the determinants of interest rate? c. What is the linkage between macroeconomic policy and macroeconomic variables? d. What are the challenges of macroeconomic policy and sustainable culture in Nigerian? e. What policy pressations and implementation strategies are require d for macroeconomic policy and sustainable development in Nigeria? AIM, OBJECTIVE, SCOPE, AND LIMITATIONS OF THIS leadThe aim of this take in is to identify and examine the two immanent elements of Macroeconomics the fiscalandmonetary policy. Different macroeconomics variables testament overly be surveyed and their impact on sustainable development in Nigeria. The unsubtle objective of this prove pass on beto prise the macroeconomic policy and sustainable development in Nigeria. The specific objectives are a. To examine the institutional frameworks and implementation ofmacroeconomic policy in Nigeria. b. To identify the macroeconomic variablesthat are the determinants of interest rate in Nigeria c.To determine the linkage between macroeconomic policy and macroeconomic variables. d. To evaluate the challenges of the macroeconomic policy and sustainable development in Nigeria. e. To recommend and proffer implementation strategies for effective macroeconomic policy and sustaina ble development in Nigeria? The scope covers the mold of assessing the macroeconomic policy and sustainable development in Nigeria from 1980 to 2012. This involves the evaluation of institutional framework and monetary policy of CBN.The following variables get outing be taked interest rate, rattling interest rate, inflation rate, exchange rate, risk superior, to determine their relationships with GDP growth rate and sustainable development in Nigeria. The limitations ordain be encountered as the refreshfuls report progresses. There mightiness be some difficulties in assessing some documents from CBN and to compare CBN data with that humanness Bank and IMF. Theseproblems can be puzzle out through the availability of tried secondary data in the meshing.THE SIGNIFICANCE, POLICY RELEVANCE, THEORETICAL FRAMEWORK OF THIS STUDY Major concern of policy makers and monetary authorities regarding macroeconomic variables are not about the existence of these variables themselves bu t their sizes, which fluctuate in chemical reaction to volatility of other variables. The result of this study entrust add to the hypothesis of interest rate and existing automobile trunk of cognition in macroeconomic policy by assisting the CBN to conduct effective monetary policy that can drive sustainable development in Nigeria.The policy-maker forget be thinking(a) to make appropriate macroeconomic policy. skillful language of macroeconomics will be simplified for the benefits of individuals in their financial transactions. The knowledge of financial operators and their entrepreneur acumen will beenriched with the introduction of risk support as a macroeconomic analysing tool. Proper Information is necessary to compose Macroeconomic awareness. This search will survey different theories of macroeconomics with special center on on macroeconomic policy of CBN.The survey of various interpretations of macroeconomic variables will be carried out. The classical possible a ction Adam smith(1776),author of the riches of Nations and his follwers also the Keynesian opening of, Keynes(1936),and the new classical theory of Hoover(1988). These theories have differing views on which institution or policy instruments thatare more than effective than the other. However, Blanchard(2003) will be helpful in definition of interest rate theory which includes how inflation rate, expected inflation rate, property supply, and exchange raterelate to macroeconomic growth and stability.Barro(2008) will compare term structure of interest rate. Ackley(1971)will establish investment theory with emphasis in real interest rates. Very important in this look into is risk premium which will be defined with Perloff(2007) theory on federal and capital market bonds. To compare relationship among monetary economic variables and complementary policy instruments of CBN, Udaba(2002) identifies Open Market Operations(OMO), Nigerian Inter-Bank Rate(NIBOR), withstand Requirement(RR ), Moral Suction, Special Deposit, and the activities of financial insurance Committee(MPC).There is also the Anyanwu and Oaikhenan(1995) amaze apply to analyse the macroeconomic policy sustainability in Nigeria. Finally, for this study, Blanchard (2003) perplex will be employ to analyse the institutional frameworks, macroeconomic variables and macroeconomic policies. METHODOLOGY This research work will be analysed through the combination of quantitative and qualitative research ruleologies. It will apply some(prenominal) the ancient and secondary sources of data collection. For esteem procedure, the study will employ vector Autoregressive Model(VAR) and Autoregressive delineateal Heteroscedasticity(GARCH).The VAR pretence was developed by Sims(1980) and will be usedto have the second objective while GARCH method by (Engle, 1982 Bollerslev, 1986) will be applied to capture third objectives. VAR pattern is theory-free model because some countries exhibit agency charact eristics that sometimes are innocent(p) of any economic theory. The choice of this model was because of its unique feature to take away out dynamic behaviour of macroeconomic variables. In the model, every variable is seen as endogenous variable that can be explained by its lagged take account and lagged assesss of all other variables in the model.The GARCH model is a common method in financial literatures used as reliable model for volatility. The model takes the form of a univariateAutoregressive (AR) process of variables in question and the sectionalization as a function of square up innovations from this AR process. Unit beginning tribulation and Co-Integration Test will be conducted to know the stationary position of the macroeconomic variables, their order of integrations, and to identify the number of equations that exist in the model. The increase Dickey Fuller(ADF) and Johnasen Method, Gujaranti and Porter(2009)are current statistical method for this research.Prim ary sources of data will be collected through pre-arranged oral interviews and allurement for filling of questionnaires to knowledgeable individuals and experts in the field of monetary policy and financial institutions. There are necessitate to natter the headquarter of CBN, some banks,interact with policy makers and Nigerians from all walks of life. The secondary data will come from CBN Statistical Bulletin, NBS, World Bank and IMF Economic Outlook, economic journals, internet and electronic media.The NIPSS library will ease assess to some books and unpublished researchers. A sample size primary data source which will not be less than 50 respondents and willbe random collected from germane(predicate) offices and institutions. To conduct oral interviews and serve questionnaires, there are needs to visit the headquarter of CBN, some banks, interact with policy makers, Nigerians from all walks of life. The computer practise will be E-view 3. 1 or above. This application handles Time- serial data more efficiently.DEFINITION OF term/CONCEPTUAL CLASSIFICATIONS mouth Autoregressive Conditional Heterscedasticity(GARCH) ecumenicalised Autoregressive conditional heterscedasticity used in measuring volatility in macroeconomic Time Series. Limited to more of financial time series. Vector Autoregression(var) Vector Autoregressive, used to estimate the lagged value of a variables and its lagged value to other variables. Helps in solving multiple equations problems among macroeconomic variables and to identify bilateral causality between variable e. g. nterest rate effect inflation and inflation effects interest rate. United Root Test A statistical instrument used to test the stationarity (or non-stationarity) of time series variables. United Root Test resulthelps to worsen or accept the zero hypothesis. Co-integration Test If two variables have eagle-eyed term or offset relationship between them, they co-integrated e. g. Fishers quantity theory of money. In i ts application, the parameter of estimated variables is compare with its critical significance. indemnity Ineffectiveness Theorem(PIT)The theorem based on new-fangled Classical economics that money is neutrality on money in macroeconomic policies. Conclusions This work is nonionized into five sections. sectionalisation star present the Backgrounds, Problems of Macroeconomic Policy and sustainable Development in Nigeria, question QuestionsAims of submit and Objectives of have, the Scope of the Study, Limitations, the Significance of the Study/Policy Relevance, Theoretical Framework, Hypotheses of the Study and Methodology. Section Three, discusses the historical development of macroeconomic policy and sustainable development in Nigeria.The focus here will be Monetary Policy of Central Bank of Nigeria, with specific study in interest rate determinant. Section Four will present data, content analysis and interpretations. Section five will display the overview of the research wo rk include abridgment of findings, conclusions, recommendation and implementation strategies. References Ackley, G. (1971), Macroeconomics. UK Macmillian Adam Smith, (1776). masterpieceAn Inquiry into the Nature and Causes of the Wealth of Nations. Edited by Edwin Cannan. simoleons UniversityofChicagoPress,1976.Availableonlineat http//www. econlib. org/library/Smith/smWN. html, 14/3/2013 Ampomg, K. O. (2005), Inflation Targeting Monetary Policy-the Way Forward,www. ghanaweb. com/ghanahomepage/features/artikel. phd? ID=80363. 12/3/2013 Anyanwu, J. C and H. E. Oaikhenan(1995),Modern MacroeconomicsTheory and applications programme in Nigeria. OnitshaJoanee Educational Publishers Ltd. Blanchard, O. (2003), Macroeconomics. peeled tee shirt Prentice Hall. Bollerslev, T. (1986), Generalised Autoregressive Condition Heteroscedasticity. Journal of Econometrics, 31, 307-327.Barro,R. J. (2008), Macroeconomics. New Jersey Prentice Hall. CBN, (2011), Monetary Policy Reform. www. cenbank. or g/monetarypolicy reforms. asp. 13/3/2013. Engle, R. F. (1982), Autoregressive Condition Heterscedasticity with Estimates of the deviation of United Kingdom. Econometrical, 50, 987-1000. Gujarati, D. N. And Porter, D. C. (2009), Basic Econometrics. New York McGraw-Hill Education. Hoover, Kevin D. (1988), The New Classical Macroeconomics A sceptical Inquiry. Oxford Blackwell IndexMundi, (2011), Consumer Price, www. indexmudi. om/nigeria/inflation rate%28consumerprice%29. html. 12/3/2013. Keynes, John M. (1935). The General Theory of Employment, Interest, and Money. London Macmillan. Obafemi,O. Thisday, CBN and Financial Policy Implementation. 16 February, 2013. Ojomaikre, A. Guardian, Nigeria is not ontogeny and Broke(1). 25 June, 2012. Perloff, J. M. (2007), Microeconomics. New York Pearson/Addison Wesley. Sims, A. A. (1980), Macroeconomics and Reality. Econometrical, 48, 10. Udaba, S. I. (2002), An Introduction to Nigerian Public Finance. EnuguLinco Press.Macroeconomics Policy a nd Sustainable Development in NigeriaMACROECONOMICS POLICY AND SUSTAINABLE DEVELOPMENT IN NIGERIA INTRODUCTION In normal economic condition, macroeconomic policy drivessustainable development of anation. The two main branches of macroeconomics policies are based on monetary and fiscal economics. Central Bank, the nationalapex bank controls the monetary policy while the Ministry of Financeplays major role in national fiscal policy. However, most economists concur that, synergy exists between micro-and macro-economics variables and two policy agents of government the CBN and Ministry of Finance determine the success or the degree of sustainability of macroeconomic development.In support of theimportance of central bank in macroeconomic policy, Ampong(2005) posits that non-artificial central bank independency has beena source of great success for the management and stabilisation of macroeconomic variables in countries like Norway, Sweden, Israel, Iceland, Denmark, New Zealand, United K ingdom, etc. In essence, there is theory gap among economists onthe level of central banks independence, especially in developing economy such as Nigeria where there have been constant agitating for curtailing of the CBNs autonomy. Nigeria economy has passed many phases since the introduction of SAP by Babangida Government in 1986.The Abacha Government came up with Vision 2010, the Obasanjo with NEEDS, the Yardua with Nigeria Vision 202020 and presently, the Jonathans Transformation Agenda. From 1986, Nigeria had total of four CBN Governors plus the incumbent, MallamSanusiLamidoSanusi. CBN Bulletin (2011) enumerated policy contents of SAP with major objectives to remove the controls of interest rates, enhance the institutional structure and supervision. Most importantly, to strengthen the money and capital markets through policy changes and distress resolution measuresand to improve the linkages between formal and informal financial sectors.The removal of the control of interest rat e through inflation targeting is somewhat the main focus of SAP. The concernsof the financial operators, the real sectors managers, the economists, and the policy analysts are the effectiveness of macroeconomic policy instruments of the CBN and the Ministry of Finance. Then, the impact in GDP growth rate,the stability of macroeconomic variables and the economic growth policy sustainability. In essence, citizens want to see how growth in GDP results to increase in employment, equal distribution of wealth, enabling business nvironment, and improvements in Human Development Index(HDI). National Bureau of Statistics, NBS (2013) data presents positive outlook of the annual macroeconomic variables in Nigeria as reported by CBN. From 1980 to 2012, the data depicts constant increase in GDP Growth Rate,stable money supply, controlled inflation Rate, favourable interest Rate, etc. The Monetary Policy Committee(MPC) has maintained interest rate at double digits since 2009. Many economists and policy analysts question the integrity of NBS macroeconomic data and the CBN reports on the state of the economy.Ojomaikre(2012) questions the rationale of a statement he accredited to Nigerias Finance Minister,NgoziOkonjo-Iweala that Nigeria is one of the fastest growing economies in the world. Ojomaikre argues that Nigeria is not growing but broke. He asserts that government survey found out that, unemployment had increased across the country and was higher(prenominal) in rural than in urban areas. Similarly,he argues that the absolute poverty level had leapt from 54 per cent in 2006 to 70 per cent in 2010. The contradictions and argumentsregarding the growth of Nigeria economy and sustainability continue unabated.Obafemi(2013) supports some policies already implemented by the CBN in the last few years. He, however,questions the effectiveness of these policies in achieving the desired results and their sustainability. Sustainability in his opinion is about policy reversals when th e present CBN Governor leaves office. Hoover(1988), posits that policy ineffectiveness theorem of New Classical school can be used to describe the current economic quagmire in Nigeria. PROBLEMS OF MACROECONOMIC POLICY AND SUSTAINABLE DEVELOPMENT IN NIGERIA Nigerias financial sector witnessed seemly tremendous innovations preceding the SAPin 1986.Objectives of SAP are to provide a liberalised and level playing field for the emergency of effective and efficient institutions that would serve as an engine of economic growth. As part of the reforms, CBN liberated the operating licenses of commercial banks. Their number rose from 40 in 1986 to 120 banks in 1992. The reforms led to the emergences of other financial institution such as discount houses and bureaux de changes which were non-existence prior to 1986. Importantly, CBN data (2012)depicts the increases in the capital base of banks since the introduction of reforms.The capital base of all bank and financial institutions was raised in 1998, from 10 million to 500 million. Presently, after recapitalization in 2005, the capital base rose to 25 Billion Naira. However, the major negative economic effects of reform were excess liquidity, unstable exchange rate, high inflation and volatile interest rates. According to IndexMundi publication on Nigeria economy, inflation increased from 6. 26% in 1986 to about 49% in 1989, and reached the peak of 72% in 1995, depicting the highest rates recorded in Nigeria economy since 1986.CBN statistical data depicts macroeconomic indicators of money supply, inflation, and interest rates from 1986 when SAP was introduced. Money supply increased from about 24 Billion Naira in 1986 to 370 Billion Naira in 1996, and by 2006 money supply rose to four trillion Naira. The extreme volatility of inflation data within these periods demonstrate the instability of Nigerian economy which monetarists refer as monetary policy trap. On interest rates, CBN data shows that interest rate which was 1 2% in 1986 jumped to 24% as of 1989.Since late 1990s to 2004, interest rates in Nigeria have remained above 20% and even reached 30% in 2002. What is the cause of interest rate variability and what is the determinant of interest rate in economy? Blanchard(2003) examines domestic factors such as inflation, money supply, GDP growth rate and exchange rates as key factors. Factors that distinguish developed and developing countries in interest rate regime are efficiency of macroeconomic policy, its operation and implementation strategy. Some weaknesses associated with developing economies are weak institutional and weak legal frameworks.In developing economy, there is always the problem of high interest rate spread because of excess risk taken by commercial banks. Excessive risk has potential to stall economic activities and GDP growth. In the case of Nigeria, combined with these characteristics of developing countries, has also problem of systemic corruption which tends to reduce the e fficiency of macroeconomic policy QUESTIONS OF MACROECONOMICS POLICY AND SUSTAINABLE DEVELOPMENT IN NIGERIA This study will seek to provide the answer to the following questions. . What are the institutional frameworks for implementation ofmacroeconomic policy in Nigeria? b. What macroeconomic variables are the determinants of interest rate? c. What is the linkage between macroeconomic policy and macroeconomic variables? d. What are the challenges of macroeconomic policy and sustainable development in Nigerian? e. What policy recommendations and implementation strategies are required for macroeconomic policy and sustainabledevelopment in Nigeria? AIM, OBJECTIVE, SCOPE, AND LIMITATIONS OF THIS STUDYThe aim of this study is to identify and examine the two essential elements of Macroeconomics the fiscalandmonetary policy. Different macroeconomics variables will also be surveyed and their impact on sustainable development in Nigeria. The broad objective of this study will beto assess th e macroeconomic policy and sustainable development in Nigeria. The specific objectives are a. To examine the institutional frameworks and implementation ofmacroeconomic policy in Nigeria. b. To identify the macroeconomic variablesthat are the determinants of interest rate in Nigeria c.To determine the linkage between macroeconomic policy and macroeconomic variables. d. To evaluate the challenges of the macroeconomic policy and sustainable development in Nigeria. e. To recommend and proffer implementation strategies for effective macroeconomic policy and sustainable development in Nigeria? The scope covers the process of assessing the macroeconomic policy and sustainable development in Nigeria from 1980 to 2012. This involves the evaluation of institutional framework and monetary policy of CBN.The following variables will be analysed interest rate, real interest rate, inflation rate, exchange rate, risk premium, to determine their relationships with GDP growth rate and sustainable de velopment in Nigeria. The limitations will be encountered as the study progresses. There might be some difficulties in assessing some documents from CBN and to compare CBN data with that World Bank and IMF. Theseproblems can be solved through the availability of reliable secondary data in the internet.THE SIGNIFICANCE, POLICY RELEVANCE, THEORETICAL FRAMEWORK OF THIS STUDY Major concern of policy makers and monetary authorities regarding macroeconomic variables are not about the existence of these variables themselves but their sizes, which fluctuate in response to volatility of other variables. The result of this study will add to the theory of interest rate and existing body of knowledge in macroeconomic policy by assisting the CBN to conduct effective monetary policy that can drive sustainable development in Nigeria.The policy-maker will be well-informed to make appropriate macroeconomic policy. Technical language of macroeconomics will be simplified for the benefits of individual s in their financial transactions. The knowledge of financial operators and their entrepreneur acumen will beenriched with the introduction of risk premium as a macroeconomic analysing tool. Proper Information is necessary to create Macroeconomic awareness. This research will survey different theories of macroeconomics with special focus on macroeconomic policy of CBN.The survey of various definitions of macroeconomic variables will be carried out. The classical theory Adam Smith(1776),author of the Wealth of Nations and his follwers also the Keynesian theory of, Keynes(1936),and the new classical theory of Hoover(1988). These theories have differing views on which institution or policy instruments thatare more effective than the other. However, Blanchard(2003) will be helpful in definition of interest rate theory which includes how inflation rate, expected inflation rate, money supply, and exchange raterelate to macroeconomic growth and stability.Barro(2008) will compare term struc ture of interest rate. Ackley(1971)will establish investment theory with emphasis in real interest rates. Very important in this research is risk premium which will be defined with Perloff(2007) theory on federal and capital market bonds. To compare relationship among monetary economic variables and complementary policy instruments of CBN, Udaba(2002) identifies Open Market Operations(OMO), Nigerian Inter-Bank Rate(NIBOR), Reserve Requirement(RR), Moral Suction, Special Deposit, and the activities of Monetary Policy Committee(MPC).There is also the Anyanwu and Oaikhenan(1995)model used to analyse the macroeconomic policy sustainability in Nigeria. Finally, for this study, Blanchard (2003) model will be used to analyse the institutional frameworks, macroeconomic variables and macroeconomic policies. METHODOLOGY This research work will be analysed through the combination of quantitative and qualitative research methodologies. It will apply both the primary and secondary sources of dat a collection. For estimation procedure, the study will employ Vector Autoregressive Model(VAR) and Autoregressive Conditional Heteroscedasticity(GARCH).The VAR model was developed by Sims(1980) and will be usedto capture the second objective while GARCH method by (Engle, 1982 Bollerslev, 1986) will be applied to capture third objectives. VAR model is theory-free model because some countries exhibit particular characteristics that sometimes are devoid of any economic theory. The choice of this model was because of its unique feature to bring out dynamic behaviour of macroeconomic variables. In the model, every variable is seen as endogenous variable that can be explained by its lagged value and lagged values of all other variables in the model.The GARCH model is a popular method in financial literatures used as reliable model for volatility. The model takes the form of a univariateAutoregressive (AR) process of variables in question and the variance as a function of squared innovatio ns from this AR process. Unit Root Test and Co-Integration Test will be conducted to know the stationary position of the macroeconomic variables, their order of integrations, and to identify the number of equations that exist in the model. The Augmented Dickey Fuller(ADF) and Johnasen Method, Gujaranti and Porter(2009)are current statistical method for this research.Primary sources of data will be collected through pre-arranged oral interviews and solicitation for filling of questionnaires to knowledgeable individuals and experts in the field of monetary policy and financial institutions. There are needs to visit the headquarter of CBN, some banks,interact with policy makers and Nigerians from all walks of life. The secondary data will come from CBN Statistical Bulletin, NBS, World Bank and IMF Economic Outlook, economic journals, internet and electronic media.The NIPSS library will facilitate assess to some books and unpublished researchers. A sample size primary data source which will not be less than 50 respondents and willbe random collected from relevant offices and institutions. To conduct oral interviews and serve questionnaires, there are needs to visit the headquarter of CBN, some banks, interact with policy makers, Nigerians from all walks of life. The computer application will be E-view 3. 1 or above. This application handles Time-series data more efficiently.DEFINITION OF TERMS/CONCEPTUAL CLASSIFICATIONS Generalised Autoregressive Conditional Heterscedasticity(GARCH) Generalised Autoregressive conditional heterscedasticity used in measuring volatility in macroeconomic Time Series. Limited to more of financial time series. Vector Autoregression(var) Vector Autoregressive, used to estimate the lagged value of a variables and its lagged value to other variables. Helps in solving multiple equations problems among macroeconomic variables and to identify bilateral causality between variable e. g. nterest rate effect inflation and inflation effects intere st rate. United Root Test A statistical instrument used to test the stationarity (or non-stationarity) of time series variables. United Root Test resulthelps to reject or accept the null hypothesis. Co-integration Test If two variables have long term or equilibrium relationship between them, they co-integrated e. g. Fishers quantity theory of money. In its application, the parameter of estimated variables is compare with its critical significance. Policy Ineffectiveness Theorem(PIT)The theorem based on New Classical economics that money is neutrality on money in macroeconomic policies. Conclusions This work is organised into five sections. Section One present the Backgrounds, Problems of Macroeconomic Policy and Sustainable Development in Nigeria, Research QuestionsAims of Study and Objectives of Study, the Scope of the Study, Limitations, the Significance of the Study/Policy Relevance, Theoretical Framework, Hypotheses of the Study and Methodology. Section Three, discusses the hist orical development of macroeconomic policy and sustainable development in Nigeria.The focus here will be Monetary Policy of Central Bank of Nigeria, with specific study in interest rate determinant. Section Four will present data, content analysis and interpretations. Section five will display the overview of the research work include summary of findings, conclusions, recommendation and implementation strategies. References Ackley, G. (1971), Macroeconomics. UK Macmillian Adam Smith, (1776). MasterpieceAn Inquiry into the Nature and Causes of the Wealth of Nations. Edited by Edwin Cannan. Chicago UniversityofChicagoPress,1976.Availableonlineat http//www. econlib. org/library/Smith/smWN. html, 14/3/2013 Ampomg, K. O. (2005), Inflation Targeting Monetary Policy-the Way Forward,www. ghanaweb. com/ghanahomepage/features/artikel. phd? ID=80363. 12/3/2013 Anyanwu, J. C and H. E. Oaikhenan(1995),Modern MacroeconomicsTheory and Application in Nigeria. OnitshaJoanee Educational Publishers Lt d. Blanchard, O. (2003), Macroeconomics. New Jersey Prentice Hall. Bollerslev, T. (1986), Generalised Autoregressive Condition Heteroscedasticity. Journal of Econometrics, 31, 307-327.Barro,R. J. (2008), Macroeconomics. New Jersey Prentice Hall. CBN, (2011), Monetary Policy Reform. www. cenbank. org/monetarypolicy reforms. asp. 13/3/2013. Engle, R. F. (1982), Autoregressive Condition Heterscedasticity with Estimates of the Variance of United Kingdom. Econometrical, 50, 987-1000. Gujarati, D. N. And Porter, D. C. (2009), Basic Econometrics. New York McGraw-Hill Education. Hoover, Kevin D. (1988), The New Classical Macroeconomics A Sceptical Inquiry. Oxford Blackwell IndexMundi, (2011), Consumer Price, www. indexmudi. om/nigeria/inflation rate%28consumerprice%29. html. 12/3/2013. Keynes, John M. (1935). The General Theory of Employment, Interest, and Money. London Macmillan. Obafemi,O. Thisday, CBN and Financial Policy Implementation. 16 February, 2013. Ojomaikre, A. Guardian, Nigeri a is not Growing and Broke(1). 25 June, 2012. Perloff, J. M. (2007), Microeconomics. New York Pearson/Addison Wesley. Sims, A. A. (1980), Macroeconomics and Reality. Econometrical, 48, 10. Udaba, S. I. (2002), An Introduction to Nigerian Public Finance. EnuguLinco Press.