Open Access Journal Article

Impact of Monetary Policy on the Performance of Commercial Banks: Evidence from Nigeria: 2008-2023

by Elizabeth Obiaje a  and  Richard Umeokwobi b,*
a
Bingham University, Nasarawa state, Nigeria
b
Monetary Policy Department, Central Bank of Nigeria, Abuja, Nigeria
*
Author to whom correspondence should be addressed.
FEL  2024 3(3):33; https://doi.org/10.58567/fel03030003
Received: 22 June 2024 / Accepted: 2 August 2024 / Published Online: 11 December 2024
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Abstract

This paper investigates the impact of monetary policy on the performance of deposit money banks in Nigeria, using monthly data series spanning the period 2008 to 2023. Total private sector credit of deposit money banks was used to proxy the performance of deposit money banks while money supply, monetary policy rate, cash reserve ratio, and maximum interest rate were used as proxies for monetary policy. The Ex-post Facto research design was adopted in this study. Data on total private sector credit of deposit money banks, money supply, monetary policy rate, cash reserve ratio, and maximum interest rate were obtained from the Central Bank of Nigeria (CBN) Statistical bulletin. The hypotheses of this paper were tested using the Autoregressive Distributed Lag statistics. The findings disclosed that total private sector credit of deposit money banks has a significant relationship with money supply and maximum interest rate while cash reserve ratio and monetary policy rate has an insignificant relationship with total private sector credit of deposit money banks. The researchers recommended among other things that the monetary authorities should consider policies that enhance liquidity within the banking system. This can be achieved through open market operations, reducing the reserve requirements, or other mechanisms that increase the availability of funds in the economy as the money supply was found to be statistically significant. Also, it is crucial for monetary authorities to monitor and adjust the maximum interest rates to ensure they remain conducive to deposit growth. High lending rates may discourage borrowing and subsequently reduce deposits, while more favorable rates could encourage economic activity and deposit inflows.

Keywords: Monetary Policy; Money Supply; Central Bank of Nigeria, Nigeria;
Copyright: © 2024 by Obiaje and Umeokwobi. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

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ACS Style
Obiaje, E.; Umeokwobi, R. Impact of Monetary Policy on the Performance of Commercial Banks: Evidence from Nigeria: 2008-2023. Financial Economics Letters, 2024, 3, 33. https://doi.org/10.58567/fel03030003
AMA Style
Obiaje E, Umeokwobi R. Impact of Monetary Policy on the Performance of Commercial Banks: Evidence from Nigeria: 2008-2023. Financial Economics Letters; 2024, 3(3):33. https://doi.org/10.58567/fel03030003
Chicago/Turabian Style
Obiaje, Elizabeth; Umeokwobi, Richard 2024. "Impact of Monetary Policy on the Performance of Commercial Banks: Evidence from Nigeria: 2008-2023" Financial Economics Letters 3, no.3:33. https://doi.org/10.58567/fel03030003
APA style
Obiaje, E., & Umeokwobi, R. (2024). Impact of Monetary Policy on the Performance of Commercial Banks: Evidence from Nigeria: 2008-2023. Financial Economics Letters, 3(3), 33. https://doi.org/10.58567/fel03030003

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