ABSTRACT

This research study investigates the effect of monetary policy on the performance of

commercial banks in Nigeria. It eeks to determine the effect of monetary policy

implementation on the performance cE commercial banks, the effectiveness and efficiencies

of the policies in view of achieving basic microeconomic objectives of the government,

investigate the impact of the monetay policy, and to detennine whether monetaiy policy

affects increase in profitability of corn mercial banks. This study is significant as it shall help

policy makers such as Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance

Corporation (NDIC) in conceiving and executing monetary policies especially as it relates to

bank performance, as well as bring to the knowledge of the public the rational behind the

monetary policy activities. For the lypotheses formulated for the purpose of this study,

Monetary Policy ratio, Interest Rate. Cash Reserve Rate, Liquidity Ratio, and Loan-to-

Deposit Ratio were used as variabes. Multiple Regression was employed to analyze

secondary data obtained for the study. The result of the study revealed that monetary policies

appear to have significant influence on banking operations in the commercial banks.

However, sequel to other factors it cid not have strong effect on the performance of the

commercial banks; Cash Reserve Rate as well as the Liquidity Ratio in the commercial banks

have inverse effect on the performance of the banks; monetary policy rate of the Central Bank

of Nigeria (CBN) does not have any si cong effect on the lending ability of commercial banks,

as has been ordinarily believed. Folowing the findings, the researcher conclude that:

commercial banks whose objective is to maximize profit will not capitalize on the monetary

policy measures of the Central Bank of Nigeria (CBN) alone for effective operation and they

do not base their lending activities solely on the monetary policies of the Central Bank of

Nigeria (CBN). Thus, the researcher recommends that commercial banks should balance the

allocation of their available cash in a way there will enough for investment which will

generate returns, and enough to give cut as loans which will also generate returns in form of

interest; commercial banks should no. just give out loans to borrowers because the Interest

I, Rate issued by the Central Bank of Nieria is high and favourable to banks, rather, the banks

should always consider the reliability of the borrowers so as to make efficient and effective

lending operation.