Monetary Policy Shocks and Life Expectancy in Nigeria

Abstract

Concerned about Nigeria's low life expectancy despite ongoing efforts to improve the country's living standards, this study investigates the effects of monetary policy shocks on life expectancy in Nigeria from 2017 to 2024. Utilizing the Vector Correction Model (VECM), the analysis leverages time series data obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin, various publications by the National Bureau of Statistics (NBS), and the Economic Policy Uncertainty Database. The results indicate that both money supply and economic policy uncertainty positively and significantly influence life expectancy. In contrast, while real interest rate fluctuations and government health spending also have positive effects, they are not statistically significant. Notably, real exchange rate depreciation and the domestic savings rate negatively and significantly impact life expectancy in Nigeria. The error correction term suggests that around 93% of past imbalances are being addressed. The study concludes that monetary policy is vital in shaping a monetary framework focused on stability, which would involve managing exchange rate fluctuations, increasing money supply to productive sectors, and reducing real interest rates. This comprehensive approach is expected to enhance economic conditions, indirectly improving access to healthcare, elevating living standards, and ultimately increasing life expectancy.