IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 10 NO. 5 2024
DOI: 10.56201/ijbfr.v10.no5.2024.pg67.91

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Monetary Policy and Bank Performance Nexus in Nigeria: A Critical Analysis

Agoh, Ndubuisi, Ogbulu, Onyemachi Maxwell, Okanta, Sunday Ukeje

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Abstract

This study examined the impact of monetary policy variables on deposit money banks’ performance using return on equity as the indicator of bank performance. The monetary policy instruments (Cash Reserve ratio, liquidity ratio, Monetary Policy Rate) and deposit money banks' performance proxied by return on equity were collected from the NDIC publications and CBN Statistical Bulletin and various issues of CBN’s Annual Statement of Accounts. The time series data covered the period of 1985 to 2020. The regression tool employed revealed that Cash Reserve ratio has positive relationship with return on equity while liquidity ratio and Monetary Policy Rate have no significant relationship with Return on Equity. The results imply that bank performance is not significantly affected by CBN’s monetary policy measures. Therefore, it is suggested among others that the Central Bank of Nigeria (CBN) should moderate its monetary policy instruments to ensure their effectiveness on deposit money banks.

keywords:

Return on Equity, Cash Reserve ratio, liquidity ratio, Monetary Policy Rate, CBN.

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