The Effect of Monetary Policy on the Performance of Deposit Money Banks in Nigeria

Abstract

This study broadly seeks to analyze the effect of monetary policy on the performance of deposit money banks in Nigeria. This research was based on secondary source of data extracted out from Central Bank of Nigeria (CBN) statistical bulletin and Index mundi. The Autoregressive Distributed Lag (ARDL) approach to cointegration was applied to achieve the objective. The empirical results revealed that both in the long run and short run, bank lending rate (BLR) has been found to have a significant positive impact on banks loans and advances (BLA), This means that (BLR) has significant positive impact on the performance of deposit money banks in Nigeria. While liquidity rate (LR) has significant impact in the long run but has no significant impact in the short run likewise interest rate (IR) has no significant impact in the long run but in the short run has significant and positive impact on the performance of deposit money banks. The study concluded that increasing the interest rate can equally lead to improve performance in the short‐run as this can motivate customers to save more but this effect will neutralize in the long‐run. The study recommends that the central bank of Nigeria should redefine its monetary policy instruments to make them more attractive to the banks. This will make banks to embrace them beyond mere.

Moderating Effect of Bank Size on the Relationship Between Interest Rate, Liquidity, and Profitability of Commercial Banks in Nigeria

“…Logically, these relationships affirmed the descriptive statistics in table 4.1 where the average lending rate was 16.8% and the average deposit rate was 5.4%, thus the interest rate spread was 11.4%. This finding corresponds to the studies that found a significant positive relationship between the lending rate and bank performance (Otiwu, 2022;Bala, Godiya, Hadith, & Maijama'a, 2022); a significant and negative relationship between deposit rate and bank performance (Brown, 2020;Caliskan & Lecuna, 2020). Table 4.6 further indicates that loan-todeposit ratio is positively related to the performance at 5% level.…”

Monetary policy regimes and price stability in the West African monetary zone

“…The empirical review related to this study was mostly on Nigeria and is more on the effect of monetary policy on bank lending Modugu and Dempere (2022), Bala, Godiya, Hadith, and Maijama'a (2022), Adetutu et al, (2021), Olofinlade and Azeez (2021) Yunusa, Williams, and Adegbenle (2020), Lartey (2018), Abere, Obarafo, and Adewole (2020) Mukolu and Adeleke (2020), Olofinlade, Oloyede, and Oke (2020) and Mordi, et al (2019). Also, on the effect on bank credit especially to the private sector Awoniyi and Ogundipe (2021) 2018) Oyeyemi (2019).…”