IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v6y2022i3p310-321.html
   My bibliography  Save this article

Monetary Policy and Deposit Money Banks Lending in Nigeria 2000-2020

Author

Listed:
  • Obi-Nwosu Victoria O

    (Department of Banking and Finance, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria)

  • Chukwu, Kenechukwu Origin

    (Department of Banking and Finance, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria)

Abstract

This study investigated the effect of monetary policy on deposit money banks lending in Nigeria (2000 – 2020) using secondary data from Statistical bulletin of Central Bank of Nigeria. The research work used the Vector Autoregressive Estimates to test the effect of the independent variables (Monetary Policy Rate, Liquidity Ratio, Cash Reserve Ratio and Loan to Deposit Ratio) on the dependent variable (Total loans and advances). The study found that monetary policy has negative and significant effect on deposit money banks lending in Nigeria within the period of the study. The study therefore advocates that monetary authority should strive to maintain a reasonable interest rate that will tends to reduce cost of borrowing and lending in the economy. There is need to strengthen bank loan and advance and monetary policy through effective and efficient regulation and supervisory framework. Government should through the Central Bank of Nigeria ensure working monetary policy instrument and make a periodic review of the polices in a way that will encourage bank lending. Monetary authority should manage the lending rate properly for it to be attractive and affordable for investors to borrow money from the bank. In conclusion, monetary policy rate, liquidity ratio, cash reserve ratio and loan to deposit ratio should be looked into by monetary authority in a way that is friendly to loan advancement especially relating to those who are in need of it. Finally, monetary policy should not be used in isolation but in collaboration with fiscal policy.

Suggested Citation

  • Obi-Nwosu Victoria O & Chukwu, Kenechukwu Origin, 2022. "Monetary Policy and Deposit Money Banks Lending in Nigeria 2000-2020," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(3), pages 310-321, March.
    • Handle: RePEc:bcp:journl:v:6:y:2022:i:3:p:310-321
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-6-issue-3/310-321.pdf
    Download Restriction: no
    File URL: https://www.rsisinternational.org/virtual-library/papers/monetary-policy-and-deposit-money-banks-lending-in-nigeria-2000-2020/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ikechukwu Kelilume, 2014. "Effects of the Monetary Policy Rate on Interest Rates in Nigeria," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(1), pages 45-55.
    2. Claudio Borio & Leonardo Gambacorta & Boris Hofmann, 2017. "The influence of monetary policy on bank profitability," International Finance, Wiley Blackwell, vol. 20(1), pages 48-63, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Molyneux, Philip & Pancotto, Livia & Reghezza, Alessio & Rodriguez d'Acri, Costanza, 2022. "Interest rate risk and monetary policy normalisation in the euro area," Journal of International Money and Finance, Elsevier, vol. 124(C).
    2. International Monetary Fund, 2016. "Republic of Poland: Selected Issues," IMF Staff Country Reports 2016/211, International Monetary Fund.
    3. Nimrod Segev & Sigal Ribon & Michael Kahn & Jakob Haan, 2024. "Low Interest Rates and Banks’ Interest Margins: Does Deposit Market Concentration Matter?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 65(2), pages 189-218, June.
    4. Ernest Dautovic, 2019. "Has Regulatory Capital Made Banks Safer? Skin in the Game vs Moral Hazard," Cahiers de Recherches Economiques du Département d'économie 19.03, Université de Lausanne, Faculté des HEC, Département d’économie.
    5. J. Achua & H. Nagado & I. I. Okafor, 2020. "Is Inflation Always and Everywhere a Monetary Phenomenon? Evidence from Nigeria," Economic and Financial Review, Central Bank of Nigeria, vol. 58(1), March.
    6. Boungou, Whelsy & Hubert, Paul, 2021. "The channels of banks’ response to negative interest rates," Journal of Economic Dynamics and Control, Elsevier, vol. 131(C).
    7. Anthony Brassil, 2022. "The Consequences of Low Interest Rates for the Australian Banking Sector," RBA Annual Conference Papers acp2022-04, Reserve Bank of Australia, revised Dec 2022.
    8. Stefan Kerbl & Boris Simunovic & Andreas Wolf, 2019. "Quantifying interest rate risk and the effect of model assumptions behind sight deposits," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 37, pages 73-85.
    9. Killins, Robert N. & Mollick, Andre V., 2020. "Performance of Canadian banks and oil price movements," Research in International Business and Finance, Elsevier, vol. 54(C).
    10. Morten Linnemann Bech & Aytek Malkhozov, 2016. "How have central banks implemented negative policy rates?," BIS Quarterly Review, Bank for International Settlements, March.
    11. Simona Malovaná & Dominika Ehrenbergerová, 2022. "The effect of higher capital requirements on bank lending: the capital surplus matters," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(3), pages 793-832, August.
    12. Garcia, Alexandre Schwinden & Gonzaga, André Lucas Moreira, 2024. "How credit unions affect the profitability of Brazilian commercial banks?," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 190-209.
    13. Malovaná, Simona & Frait, Jan, 2017. "Monetary policy and macroprudential policy: Rivals or teammates?," Journal of Financial Stability, Elsevier, vol. 32(C), pages 1-16.
    14. Chnar Abdullah Rashid, 2019. "Pricing Policy and Its Impact on the Profitability," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 8(3), pages 101-108, July.
    15. Oleksandra Chmel & Valentyna Sinichenko & Daryna Pustovoit & Anton Shmihel, 2019. "Meta-Analysis: Effect of central bank’s key policy rate on banks’ lending interest rates," Modern Economic Studies, Kyiv School of Economics, vol. 2(1), pages 2-11.
    16. Ms. Enrica Detragiache & Mr. Thierry Tressel & Ms. Rima A Turk, 2018. "Where Have All the Profits Gone? European Bank Profitability Over the Financial Cycle," IMF Working Papers 2018/099, International Monetary Fund.
    17. Raymond F. D. D. Chaudron & Leo Haan & Marco Hoeberichts, 2023. "Banks’ Net Interest Income from Maturity Transformation and Other Interest Income: Communicating Vessels?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 63(1), pages 35-62, February.
    18. E Philip Davis & Dilruba Karim & Dennison Noel, 2020. "The Effects of Macroprudential Policy on Banks' Profitability," National Institute of Economic and Social Research (NIESR) Discussion Papers 514, National Institute of Economic and Social Research.
    19. Alihodžić Almir, 2020. "The Factors Affecting Bank Profitability: the Case of Bosnia and Herzegovina," Financial Sciences. Nauki o Finansach, Sciendo, vol. 25(2-3), pages 1-23, September.
    20. Klein, Paul-Olivier & Weill, Laurent, 2022. "Bank profitability and economic growth," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 183-199.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:6:y:2022:i:3:p:310-321. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.