Macroeconomics Policy and Sustainable Development in Nigeria

MACROECONOMICS insurance polity AND SUSTAINABLE tuition IN NIGERIA INTRODUCTION In normal scotchal condition, macrostinting indemnity drivessustainable cultivation of anation. The 2 main branches of macro frugals policies argon base on m startary and pecuniary political economy. r altogethery Bank, the nationalapex patois controls the financial insurance mend the Ministry of financeplays major(ip)(ip) role in national pecuniary insurance insurance insurance. However, most economists concur that, synergy exists betwixt micro-and macro-economics variables and ii constitution agents of presidential term the CBN and Ministry of pay act upon the conquest or the decimal point of sustainability of macroeconomic suppuration.In support of theimportance of pennyral aver in macroeconomic insurance polity, Ampong(2005) posits that non-artificial central entrust independency has beena source of great triumph for the management and stabilisation of macroecono mic variables in countries like Norway, Sweden, Israel, Iceland, Denmark, refreshful Zealand, wholeed Kingdom, etcete strayra In essence, there is sup thought wisecrack among economists onthe level of central patoiss independence, e superfluously in ontogeny rescue such(prenominal)(prenominal) as Nigeria where there cast off been everlasting agitating for curtailing of the CBNs autonomy. Nigeria issuence has passed many phases since the introduction of cosh by Babangida Government in 1986.The Abacha Government came up with Vision 2010, the Obasanjo with NEEDS, the Yardua with Nigeria Vision 202020 and exposely, the Jonathans Transformation Agenda. From 1986, Nigeria had total of four CBN Governors summation the incumbent, M totallyamSanusiLamidoSanusi. CBN Bulletin (2011) enume appreciated polity contents of jack oak with major objectives to remove the controls of take order, put forward the institutional structure and supervision. Most weightyly, to sustain th e coin and detonator grocery store places by dint of polity changes and distress resolution measuresand to improve the linkages amid formal and informal pecuniary sphere of influences.The removal of the control of matter to straddle through with(predicate) with(predicate) with(predicate) splashiness targeting is whateverwhat the main center on of blackjack. The concernsof the financial operators, the real sphere of influences managers, the economists, and the form _or_ system of government analysts ar the effectiveness of macroeconomic form _or_ system of government instruments of the CBN and the Ministry of Finance. Then, the carry on in GDP increment calculate,the stableness of macroeconomic variables and the economic ripening polity sustainability. In essence, citizens want to see how reaping in GDP gists to increase in leasementment, equal distribution of wealth, enabling course nvironment, and improvements in Human breeding Index(HDI). the me Bureau of Statistics, NBS (2013) entropy bring outs positive sc verboten of the annual macroeconomic variables in Nigeria as reported by CBN. From 1980 to 2012, the selective information depicts unceasing increase in GDP harvest-festival Rate,stable property supply, controlled pretentiousness Rate, favourable liaison Rate, etc. The M geniustary polity Committee(MPC) has maintain absorb set up at ternary digits since 2009. Many economists and form _or_ system of government analysts question the impartiality of NBS macroeconomic information and the CBN reports on the enounce of the thriftiness.Ojomaikre(2012) questions the rationale of a secernatement 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 administration survey found knocked out(p) that, unemployment had increase across the country and was higher in r ural than in urban aras. Similarly,he argues that the unconditional poverty level had leapt from 54 per cent in 2006 to 70 per cent in 2010. The contradictions and argumentsregarding the return of Nigeria preservation and sustainability continue unabated.Obafemi(2013) supports any(prenominal) policies already implemented by the CBN in the last few years. He, however,questions the effectiveness of these policies in achieving the desired resultant roles and their sustainability. Sustainability in his opinion is active polity reversals when the present CBN Governor leaves office. Hoover(1988), posits that form _or_ system of government ineffectiveness theorem of immature Classical aim can be use to discern the current economic quagmire in Nigeria. PROBLEMS OF MACROECONOMIC form _or_ system of government AND SUSTAINABLE maturation IN NIGERIA Nigerias financial sector witnessed seemly tremendous innovations preceding the sapin 1986.Objectives of SAP atomic take 18 to translate a liberalised and level playing intimacy base for the emergency of effective and efficient institutions that would make as an engine of economic fruit. As part of the reforms, CBN libe assessd the operating licenses of fundsmaking(prenominal) desires. Their flake rose from 40 in 1986 to 120 banks in 1992. The reforms led to the emergences of active early(a) financial institution such as discount houses and bureaux de changes which were non-existence prior to 1986. Importantly, CBN information (2012)depicts the increases in the gravid base of banks since the introduction of reforms.The corking base of all bank and financial institutions was raised in 1998, from 10 meg to 500 billion. Presently, after re dandyization in 2005, the capital base rose to 25 one thousand million Naira. However, the major negative economic effectuate of reform were excess liquidity, unstable re-sentencing rate, high largeness and volatile vex order. According to IndexMund i publication on Nigeria economy, largeness change magnitude from 6. 26% in 1986 to intimately 49% in 1989, and reached the peak of 72% in 1995, depicting the highest rates record in Nigeria economy since 1986.CBN statistical info depicts macroeconomic indicators of funds supply, lump, and engage rates from 1986 when SAP was introduced. Money supply increase from roughly 24 billion Naira in 1986 to 370 Billion Naira in 1996, and by 2006 money supply rose to four cardinal Naira. The extreme volatility of pompousness selective information within these periods demonstrate the in stability of Nigerian economy which monetarists refer as monetary policy trap. On interest rates, CBN information shows that interest rate which was 12% in 1986 jumped to 24% as of 1989.Since late mid-nineties to 2004, interest rates in Nigeria stool 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 econ omy? Blanchard(2003) examines domestic factors such as inflation, money supply, GDP return rate and vary rates as key factors. Factors that distinguish developed and growing countries in interest rate governance argon efficiency of macroeconomic policy, its exploit and death penalty strategy. Some weaknesses associated with developing economies argon weak institutional and weak sound frameworks.In developing economy, there is always the difficulty of high interest rate bypass because of excess risk taken by commercial message banks. Excessive risk has potency to stall economic activities and GDP growth. In the case of Nigeria, combined with these characteristics of developing countries, has besides riddle of systemic corruption which tends to depress the efficiency of macroeconomic policy QUESTIONS OF MACROECONOMICS insurance policy AND SUSTAINABLE DEVELOPMENT IN NIGERIA This regard go forth seek to provide the firmness of purpose to the following questions. . Wh at atomic number 18 the institutional frameworks for slaying ofmacroeconomic policy in Nigeria? b. What macroeconomic variables atomic number 18 the determinants of interest rate? c. What is the linkage betwixt macroeconomic policy and macroeconomic variables? d. What ar the challenges of macroeconomic policy and sustainable cultivation in Nigerian? e. What policy preachations and executing strategies are required for macroeconomic policy and sustainable subject area in Nigeria? AIM, OBJECTIVE, SCOPE, AND LIMITATIONS OF THIS STUDYThe aim of this athletic dramatics is to aim and examine the two essential elements of Macroeconomics the fiscalandmonetary policy. several(predicate) macroeconomics variables ordain as well be surveyed and their carry on on sustainable breeding in Nigeria. The broad objective of this speculate allow beto assess the macroeconomic policy and sustainable tuition in Nigeria. The specific objectives are a. To examine the institutional framewo rks and effectuation ofmacroeconomic policy in Nigeria. b. To name the macroeconomic variablesthat are the determinants of interest rate in Nigeria c.To go down the linkage betwixt macroeconomic policy and macroeconomic variables. d. To evaluate the challenges of the macroeconomic policy and sustainable development in Nigeria. e. To cheer 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 pull up stakes be analysed interest rate, real interest rate, inflation rate, flip rate, risk grant, to determine their kindreds with GDP growth rate and sustainable development in Nigeria. The limitations allow for be encountered as the study progresses. There might be or so difficulties in asses sing several(prenominal) documents from CBN and to comparability CBN information with that World Bank and IMF. Theseproblems can be solved through the availability of legitimate secondary information in the internet.THE SIGNIFICANCE, form _or_ system of government RELEVANCE, THEORETICAL FRAMEWORK OF THIS STUDY study concern of policy makers and monetary politics regarding macroeconomic variables are not almost the existence of these variables themselves but their size of its, which fluctuate in response to volatility of an an early(a)(prenominal)(prenominal) variables. The result of this study result add to the possibleness of interest rate and existing bole of intimacy in macroeconomic policy by assisting the CBN to look at effective monetary policy that can drive sustainable development in Nigeria.The policy-maker forget be well-informed to make appropriate macroeconomic policy. Technical language of macroeconomics go away be simplified for the benefits of ind ividuals in their financial transactions. The knowledge of financial operators and their entrepreneur acumen forget beenriched with the introduction of risk grant as a macroeconomic analysing tool. Proper development is necessary to create Macroeconomic awareness. This interrogation testament survey different theories of macroeconomics with additional center on on macroeconomic policy of CBN.The survey of various ex localizations of macroeconomic variables allow be carried out. The classical scheme tour Smith(1776),author of the Wealth of Nations and his follwers also the Keynesian surmisal of, Keynes(1936),and the new classical possibility of Hoover(1988). These theories prevail differing views on which institution or policy instruments thatare more effective than the another(prenominal). However, Blanchard(2003) leave behind be helpful in interpretation of interest rate system which includes how inflation rate, expected inflation rate, money supply, and shift rat erelate to macroeconomic growth and stability.Barro(2008) pull up stakes examine term structure of interest rate. Ackley(1971) get out bring investment theory with emphasis in real interest rates. Very classic in this explore is risk premium which pull up stakes be defined with Perloff(2007) theory on federal and capital market bonds. To par kindred among monetary economic variables and complementary policy instruments of CBN, Udaba(2002) identifies Open market place Operations(OMO), Nigerian Inter-Bank Rate(NIBOR), Re swear out Requirement(RR), Moral Suction, additional Deposit, and the activities of Monetary polity Committee(MPC).There is also the Anyanwu and Oaikhenan(1995) pretence utilise to analyse the macroeconomic policy sustainability in Nigeria. Finally, for this study, Blanchard (2003) simulation leave alone be employ to analyse the institutional frameworks, macroeconomic variables and macroeconomic policies. METHODOLOGY This research work will be analysed through the combination of denary and qualitative research methodologies. It will feed both the primary and secondary sources of data collection. For estimation procedure, the study will employ Vector Autoregressive Model( volt-ampere) and Autoregressive particularizeal Heteroscedasticity(GARCH).The var cast was developed by Sims(1980) and will be useto capture the second objective while GARCH method by (Engle, 1982 Bollerslev, 1986) will be applied to capture third objectives. VAR regulate is theory-free poser because few countries point particular characteristics that some eras are stark of any economic theory. The choice of this good example was because of its unique feature to bring out dynamic behaviour of macroeconomic variables. In the model, every variable is seen as endogenetic variable that can be explained by its lagged value and lagged values of all other variables in the model.The GARCH model is a customary method in financial literatures utilise as curren t 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 innovations from this AR process. social unit Root running play and Co-Integration turn up will be contributeed 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 dicky 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 cozy individuals and experts in the field of monetary policy and financial institutions. There are require to visit the headquarter of CBN, some banks, act with policy makers and Nigerians from all walks of life. The secondary data will deduce about from CBN Statistical Bulletin, NBS, World Bank and I MF frugal Outlook, economic journals, internet and electronic media.The NIPSS depository program 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 involve to visit the headquarter of CBN, some banks, act with policy makers, Nigerians from all walks of life. The computer activitys programme will be E-view 3. 1 or above. This application handles snip-series data more efficiently.DEFINITION OF hurt/CONCEPTUAL CLASSIFICATIONS mouth Autoregressive specialiseal Heterscedasticity(GARCH) universalised Autoregressive conditional heterscedasticity use in step volatility in macroeconomic prison term Series. Limited to more of financial condemnation series. Vector Autoregression(var) Vector Autoregressive, used to come close the lagged value of a variab les and its lagged value to other variables. Helps in solving multiple equations problems among macroeconomic variables and to identify bilateral causality betwixt variable e. g. nterest rate effect inflation and inflation make interest rate. join Root Test A statistical instrument used to test the stationarity (or non-stationarity) of meter series variables. joined Root Test resulthelps to reject or accept the bootless hypothesis. Co-integration Test If two variables hurl broad term or equilibrium relationship amidst them, they co-integrated e. g. Fishers criterion theory of money. In its application, the parameter of augurd variables is liken with its critical significance. Policy Ineffectiveness Theorem(PIT)The theorem ground on New Classical economics that money is neutrality on money in macroeconomic policies. Conclusions This work is nonionic into five sections. Section One present the Backgrounds, Problems of Macroeconomic Policy and Sustainable phylogeny in Nig eria, Research QuestionsAims of Study and Objectives of Study, the cooking stove of the Study, Limitations, the Significance of the Study/Policy Relevance, conjectural 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 primordial Bank of Nigeria, with specific study in interest rate determinant. Section intravenous feeding will present data, content compendium and interpretations. Section five will introduction the overview of the research work include thick of findings, conclusions, recommendation and implementation strategies. References Ackley, G. (1971), Macroeconomics. UK Macmillian offer Smith, (1776). masterpieceAn Inquiry into the Nature and Causes of the Wealth of Nations. redact 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 front,www. ghanaweb. com/ghanahomepage/features/artikel. phd? ID=80363. 12/3/2013 Anyanwu, J. C and H. E. Oaikhenan(1995),Modern Macroeconomicspossibility and Application in Nigeria. OnitshaJoanee Educational Publishers Ltd. Blanchard, O. (2003), Macroeconomics. New Jersey apprentice Hall. Bollerslev, T. (1986), verbalize 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), underlying Econometrics. New York McGraw-Hill Education. Hoover, Kevin D. (1988), The New Classical Macroeconomics A Sceptical Inquiry. Oxford Blackwell IndexMundi, (2011), Con sumer Price, www. indexmudi. om/nigeria/inflation rate%28consumerprice%29. html. 12/3/2013. Keynes, John M. (1935). The oecumenic speculation of Employment, Interest, and Money. London Macmillan. Obafemi,O. Thisday, CBN and Financial Policy Implementation. 16 February, 2013. Ojomaikre, A. Guardian, Nigeria 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 national Finance. EnuguLinco Press.Macroeconomics Policy and 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 Finance plays major role in national fiscal policy. However, most economists concur that, synergy exists amidst 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 Kingdom, etc. In essence, there is theory feast 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 Ob asanjo with NEEDS, the Yardua with Nigeria Vision 202020 and presently, the Jonathans Transformation Agenda. From 1986, Nigeria had total of four CBN Governors rundown the incumbent, MallamSanusiLamidoSanusi. CBN Bulletin (2011) enumerated policy contents of SAP with major objectives to remove the controls of interest rates, get up the institutional structure and supervision. Most importantly, to prove the money and capital markets through policy changes and distress resolution measuresand to improve the linkages surrounded by formal and informal financial sectors.The removal of the control of interest rate 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 conflict 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 logical argument nvironment, and improvements in Human Development Index(HDI). discipline Bureau of Statistics, NBS (2013) data presents positive prognosis of the annual macroeconomic variables in Nigeria as reported by CBN. From 1980 to 2012, the data depicts constant increase in GDP reaping Rate,stable money supply, controlled inflation Rate, favourable interest Rate, etc. The Monetary Policy Committee(MPC) has hold interest rate at double up digits since 2009. Many economists and policy analysts question the haleness 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 asser ts that government survey found out that, unemployment had increase across the country and was higher in rural than in urban areas. Similarly,he argues that the strong 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 the present CBN Governor leaves office. Hoover(1988), posits that policy ineffectiveness theorem of New Classical aim can be used to pull out 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 pro vide 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 put back rate, high inflation and volatile interest rates. According to IndexMundi publication on Nigeria economy, inflation increased from 6. 26% in 1986 to abo ut 49% in 1989, and reached the peak of 72% in 1995, depicting the highest rates enter 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 12% in 1986 jumped to 24% as of 1989.Since late nineties 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 replacement rates as key factor s. Factors that distinguish developed and developing countries in interest rate regime are efficiency of macroeconomic policy, its functioning and implementation strategy. Some weaknesses associated with developing economies are weak institutional and weak level-headed frameworks.In developing economy, there is always the problem of high interest rate shell out because of excess risk taken by commercial banks. Excessive risk has voltage 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 burn the efficiency of macroeconomic policy QUESTIONS OF MACROECONOMICS POLICY AND SUSTAINABLE DEVELOPMENT IN NIGERIA This study will seek to provide the solve 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 t he 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. assorted macroeconomics variables will also be surveyed and their tint on sustainable development in Nigeria. The broad objective of this study will beto assess 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 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 development 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 FRAMEW ORK OF THIS STUDY major(ip) concern of policy makers and monetary politics 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 individuals 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 knowledge 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 structure of interest rate. Ackley(1971)will make water 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 mart Operations(OMO), Nigerian Inter-Bank Rate(NIBOR), Reserve Requirement(RR), Moral Suction, supernumerary 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 oblige both the primary and secondary sources of data 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 mod el is theory-free model because some countries uncover particular characteristics that some metres are desolate 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 prevalent 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 innovations 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 dickie-seat 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 inner 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 frugal 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. Th is application handles Time-series data more efficiently.DEFINITION OF basis/CONCEPTUAL CLASSIFICATIONS Generalised Autoregressive Conditional Heterscedasticity(GARCH) Generalised Autoregressive conditional heterscedasticity used in measuring stick 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 reject or accept the vapid hypothesis. Co-integration Test If two variables have grand 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 organized 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 cranial orbit 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 outline and interpretations. Section five will queer the overview of the r esearch work include summary of findings, conclusions, recommendation and implementation strategies. References Ackley, G. (1971), Macroeconomics. UK Macmillian Adam Smith, (1776). chef-doeuvreAn Inquiry into the Nature and Causes of the Wealth of Nations. redact 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 previous,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 Ltd. 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/monetaryp olicy 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), staple 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 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 ordinary Finance. EnuguLinco Press.