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