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. 3 NO. 1 2017

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Effect of Monetary Policy on Returns on Risk Assets Evidence from Tier One Banks in Nigeria.

Ajibola, Joseph Olusegun, (Ph.D)

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Abstract

This study investigates the effect of monetary policy on the returns on risk assets; evidence of tier one banks in Nigeria. Eco Transnational bank and First Bank of Nigeria were used. The study ranges from 1986-2014, a period of 30 years. The Vector Auto- regressive (VAR) model was used to integrate the multi-variate time series. The variables used were; inflation rate, real interest rate, Treasury bill rate, loan to deposit rate for Eco bank and First bank, and the returns on asset for Eco bank and First Bank. Treasury bill rate was the only variable that was statistically significant. The regression showed that the dependent variables were responsible for half of the variations in the returns on assets. The estimated parameters were not significant in the regression model, thus, we can say monetary policy has a partial effect on the returns on assets of tier one banks in Nigeria. This could be as a result of lack of credibility in the Nigerian monetary policy system and lack of proper implementation. This study therefore recommends that the MPC needs to enforce their policies better so as to control the financial sector which is a main driver of economic growth and achieve their set objectives and targets

keywords:

Monetary Policy, Returns on assets, tier one banks, risk assets

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