NEXUS BETWEEN MONETARY POLICY AND ORANGE ECONOMY IN NIGERIA: A CATALYST FOR CREATIVE SECTOR DEVELOPMENT

Abstract

This paper investigates the relationship between monetary policy and Nigeria's orange
economy, highlighting its potential as a catalyst for creative sector development from 1985 to
2023. Monetary policy indicators, including the monetary policy rate, money supply, and cash
reserve ratio, were employed as proxies for monetary policy, while the art, entertainment, and
recreation industry served as a representation of the orange economy. Data were sourced
primarily from the Central Bank of Nigeria (CBN) Statistical Bulletin. The study applied the
Augmented Dickey-Fuller (ADF) unit root test to ensure stationarity, the Johansen cointegration test to examine long-run relationships, and the Vector Auto-Regressive (VAR)
model for short-run dynamics. Empirical findings revealed that all variables were stationary at
first difference. The Johansen co-integration test indicated no long-term association among the
variables. However, the VAR analysis demonstrated that broad money supply had a positive
and significant impact on the art, entertainment, and recreation industry, while the monetary
policy rate and cash reserve ratio showed a positive but insignificant relationship with the
sector. The study concludes that monetary policy significantly influences Nigeria’s orange
economy. It recommends that the Central Bank of Nigeria (CBN) establish a creative industry
financing framework under the Creative Industry Financing Initiative. This framework should
feature lower interest rates and longer repayment terms to support stakeholders in the art,
entertainment, and recreation sectors, fostering sustainable growth and development.