APPRAISAL OF OPEN MARKET OPERATION AS A TOOL IN CONTROLLING INFLATION IN NIGERIA

CHAPTER I

1.0 INTRODUCTION
In chapter one, in comprises the followings: Background of the study, statement of the problems purpose of the study significance of the study, Research questions, Scope of the study, Limitations of the study and definitions of terms.

1.1 Background of Study
In recent years, Nigeria has been under inflationary pressures, efforts made to limit the pressure have not produced good success.
This is because the higher the price of food items apart from other considerations have been the major cause of rising cost of living in the country and these increases prices of food items are as a result of inflationary pressures. Almost every family in Nigeria today felt the impact of high lost of items.

Inflation has been a global problem which no country has been able to find a solution to reduce or destroy it. This is the reason why economists are of the view that “Inflation spoils economic decisions” for the fact that no country has been able to solve the problem of inflation, it becomes so difficult to control it by the government.
This problem appeared as a mere threat at first but it later became a real economic problem, since then it has been repeatedly engaged the attention of governments of most countries.
Also, there has been no general agreement as to know how inflation can be controlled despite the level of the experience accumulated and the amount of energy and effort directed to it.

1.2 Statement of the Problem
Over the years, various policy measures have been formulated and implemented to achieve macro-economic objectives of the economy.
Certain momentary instruments have also been employed to achieve those objectives such as economic growth control of inflation and reduction in money supply in the economy.
However, this policy measures have not yielded the desired impact so the federal government in 1993 adopted the use of open market as an indirect monetary policy has not yielded the much expected result of controlling inflation.
Thus, the question now is to what extent has open market operation (OMO) techniques ahs been able to over come the following:
a. The problem of monitoring and enforcing the desired target.
b. Are there any possible constraints and prospect in the use of open market operate in controlling inflation in Nigeria.
c. Obviously, it is the answer to these questions that is the focus of the study.

1.3 Purpose of the Study
The function of many economic policy tools is the regulation of the economy. However, the economy resolves on the use of one market operation under the monetary policy as one of the economic policies to achieve prices stability in the economy. The major objective includes the following:
i. To find out the extent to which open market operation has help to control inflation in Nigeria.
ii To access the problems encountered in using open market operation as a tool in controlling inflation in Nigeria.
iii. To make meaningful recommendation.

1.4 Significances of the Study
The significance of this study lies on the point of view of beneficiaries, in this regard.
The project would be beneficial to the government, the Central Bank of Nigeria, the policy makers and other policy
measures towards reducing and eradicating inflation in the Nigeria economy.
To the central bank of Nigeria (CBN) the study would as well guide towards better directions to the commercial banks.
To the policy makers, the result of this research work would guide them into formulating appropriate monetary policies that may have answer(s) to inflation in Nigeria.
The study would also serve as a guide to other researchers the area of monetary policy and other open market operations.

1.5 Research Questions
i. To what extent has open market operation helped in controlling inflation in Ngieira?
ii. What are the problems encountered in using open market operation in controlling inflation in Nigeria?
iii. Did open market operation have meaningful recommendations?

1.6 Scope of the Study
The researchers work covers the impact of open market operation (OMO) measure, on inflationary control in Nigeria economy as from (1993 – 2008).

1.7 Limitation of the Study
Every human policy has its permanent weakness and strength or limitations. The major limitations on the researcher are as follows:
i. It was not easy for researchers to get all the necessary materials for carrying this research work. This is because, the researchers found it very difficult to meet the Central Bank of Nigeria (CBN) the researcher were either told by the receptionist that the librarian was not on seat or that he went for a seminar.
ii. Some research was also carried in the internet and the researchers could not find all the necessary materials for this research work

iii. The researchers did not find easy to collect materials from African Economic research and African Institute for Applied Economics.
iv. It was not possible or the researches to get all the necessary funds and resources which could have enabled them to achieve a better result, This is based on the fact that the researchers are students who solely depend on the little amount of money giving by the guardians.
v. Achievement of this study was also limited considering the transportation cost and other expenses involved
Hence, the operation coverage of the study was limited to the Central Bank of Nigeria (CBN), the Federal Office Statistics in Enugu.
Final, all these limited this research work towards the achievement of 100% success of the study.

1.8 Definition of Terms
i. Monetary policy is the type of policy used by Central Bank to reduce lending by commercial bank thereby reducing the amount of money in circulation.
ii. Open market operation involves the buying and selling of securities from and to commercial banks in order to increase or reduce the volume of money in circulation.
iii Inflation is the continuous rise in the price of good and service as a result of large volume of money in circulation used in the exchange of the available goods and services.

Also inflation is the persistence rise in general price level