AUTHOR: IHEJIRIKA, PETERS OMENI
DEPARTMENT: Financial Management Technology
SCHOOL: School of Management Technology
AFFILIATION: Federal University of Technology Owerri
This study investigated the Impact of Monetary Policy on the Performance of Banks in Nigeria. The study made extensive use of secondary data as published by the Central Bank of Nigeria. Employing the multiple regression models, the study established a significant relationship between monetary policy instruments as a whole and effective bank performance. Specifically, we found that monetary policy through minimum rediscount rate affects the lending rates of banks. Cash reserve requirement impacts significantly on the interest spread of banks. Minimum rediscount rate and cash reserve ratio have no significant relationship with growth rate of bank loans and advances. Using the t-ratio statistical tool, a significant difference was found to exist between the legally required liquidity ratio and actual liquidity ratio maintained by banks in Nigeria.The study therefore concludes that certain monetary policy instruments like open market operations, minimum rediscount rate, and cash reserve ratio, affect the performance of banks in Nigeria. We therefore suggest that monetary authorities need to re-examine the monetary policy tools at its disposal especially the cash reserve requirement, liquidity ratio, and interest rate policy in order to make them more responsive to effective management of all the functional departments especially as it affects treasury management, credit marketing and administration etc of banks in Nigeria.
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