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Effect Of Monetary Policy On The Performance Of Listed Deposit Money Banks In Nigeria

Author

Listed:
  • GIMBA John Toro

    (Department of Banking & Finance, Nasarawa State University Keffi, Nigeria)

  • VINCENT Harrison S.

    (Department of Banking & Finance, Nasarawa State University Keffi, Nigeria)

  • OYEDOKUN Godwin Emmanuel

    (Department of Banking & Finance, Nasarawa State University Keffi, Nigeria)

Abstract

This study examines the effect of monetary policy on the performance of listed deposit money banks in Nigeria from 2006-2018. The research design adopted for this study was ex post-facto research design. Panel time series data were extracted based on the variables used in the study. Net profit margin (NPM) as the dependent variable, while liquidity ratio (LQR), Interest Rate (INR), Loan to deposit ratio (LDR) and cash reserve ratio (CRR) as independent proxies to measure monetary policy. The findings show that monetary policy has significant effect on the performance of listed deposit money banks in Nigeria. Based on the result, it was concluded that liquidity ratio and loan to deposit are significant on net profit margin, likewise interest rate and cash reserve ratio were insignificant on net profit margin. Therefore, the effect of monetary policy on the Nigeria commercial banks as an engine for controlling inflation, unemployment etc. is geared towards finding a positive and constructive role for the economy. Based on the findings, it was recommended that; the Central Bank of Nigeria should manage the monetary policy rate properly, with the recent increase of loan to deposit, Government should also employ other measures to control the loan to deposit and the monetary authorities should also minimize the 22.5 % Cash reserve ratio in order to influence the level of bank performance with capacity to raise a volume of funds and also reduce the liquidity ratio from 30% to 25% to prevent the banks from folding up.

Suggested Citation

  • GIMBA John Toro & VINCENT Harrison S. & OYEDOKUN Godwin Emmanuel, 2020. "Effect Of Monetary Policy On The Performance Of Listed Deposit Money Banks In Nigeria," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 482-503, July.
    • Handle: RePEc:ora:journl:v:1:y:2020:i:1:p:482-503
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    References listed on IDEAS

    as
    1. Tobias Olweny & Mambo Chiluwe, 2012. "The Effect of Monetary Policy on Private Sector Investment in Kenya," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(2), pages 1-9.
    2. David H. Solomon, 2012. "Selective Publicity and Stock Prices," Journal of Finance, American Finance Association, vol. 67(2), pages 599-638, April.
    3. Osuagwu, Eze, 2009. "The Effect Of Monetary Policy On Stock Market Performance In Nigeria," MPRA Paper 112934, University Library of Munich, Germany, revised Jul 2009.
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    More about this item

    Keywords

    Cash reserve ratio; Interest rate; Liquidity ratio; Loan to Deposit ratio; Monetary policy;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E - Macroeconomics and Monetary Economics
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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