The Effect Of Monetary Policies Of The Central Bank Of Nigeria (cbn) On Deposit Money Bank

1.4 OBJECTIVE OF THE STUDY 

The study is embarked upon to see;

1. How many policy affect banking operations in its bid to regulate money supply in the economy with particular reference to deposit and credit creation.

2. How far the Central Bank of Nigeria has gone in its achievement of regulating money supply.

3. If the monetary policy has improved the industry as a whole.

4. The importance of monetary tools in achieving the desired control through bank operations.

5. The impact of monetary policy on banking operation both positively and negatively.

1.5 Research Question 

i. Does Central Bank Rate (CBR) has effect on the financial performance of Deposit Money 

Banks? 

ii. Does Reserve Ratio Requirement has effect on the financial performance of Deposit 

Money Banks? 

1.6 Statement of Hypothesis 

H0: There is no significant relationship between monetary policy and financial performance of Deposit Money Banks in Nigeria. 

H1: There is significant relationship between monetary policy and financial performance of 

Deposit Money Banks in Nigeria. 

1.7 Significance of the Study  

The study helps us understand the impact of an effective monetary policy regime on the performance of the Deposit Money Banks. It would aid the regulators to carefully plan and forecast the effects of its policies to meet its objectives of economic growth and full employment. To bankers, it would expose the relationship existing between our relevant variables, which will be of interest to them in their respective banks. This would also benefit the academic community which would avail them the opportunity of conducting further research in the topic of similar areas. 

The study is expected to contribute to the existing literature in the field of monetary policies. Future scholars can use this research as a basis for further research in the area of monetary policy theories.  

The study will also enlighten management teams of commercial bank on the short-term and longterm effects of the monetary policy implementations by the Central Bank. This will greatly help them in designing the risk management measures to employ given anticipated changes in monetary policies. 

1.8 Justification of the Study  

The outcome of this study will be a little guide for the deposit money banks on how to overcome the effect of monetary policy on their financial performance in Nigeria. 

The research will also serve as a source base to other scholars and researchers interested in carrying out further research in this field in future. The study therefore will extend the frontiers of the existing literature by emphasizing the effect of monetary policy on the financial performance of deposit money bank in Nigeria. 

1.9 Scope of the Study 

The scope of this research work is to examine the effects of monetary policy on the financial performance of deposit money bank in Nigeria. In which Union Bank Plc. was use as a case study. However, the research was limited to Union Bank Plc in Ibadan metropolis due to the schedule of researcher  

1.10 Definition of Terms  

1.10.1 Financial Performance  

Financial Performance analysis refers to analytical tools to measure the strength and weakness of a firm in relation to its balance sheet and profit and loss statement. Examples of bank financial performance tools and ratios include operating income, earnings before interest and taxes, Total Asset value. Financial performance analysis is carried out to ascertain the profitability position and performance of a firm. It can be conducted by management, owners, creditors, investors as demonstrated by Chenn (2011). 

1.10.2 Monetary Policy Rate (MPR)  

Minimum Rediscount Rate (MRR) now known as Monetary Policy Rate (MPR) was used to signal the desired direction of interest rate movement (Nwude, 2013).  

1.10.3 Deposit Mobilization  

Deposit Mobilization measures the aggregate mobilization of deposits in the economy. Deposits are bank accounts that allow the owner of the account (creditor) to make demand on banks. They include demand, time and savings and money market deposit account.  

1.10.4 Credit to the Private Sector  

Domestic credit to private sector by banks refers to financial resources provided to the private sector by other depository corporations (deposit taking corporations except central banks), such as through loans, purchases of non-equity securities, and trade credits and other accounts receivable, that establish a claim for repayment. For some countries these claims include credit to public enterprises (IMF, 2016).  

1.10.5 Loans and Advances  

Loans refers to a debt provided by a financial institution for a certain period while Advances are the funds provided by the banks, which needs to be payable within one year 

1.10.6 Liquidity 

The ability of a bank to meet its current obligations when they are due, and is normally a short term debt measures. 

1.10.7 Reserve Requirement 

This refers to the proportion of total deposit liabilities which the commercial and merchant banks are expected to keep as cash in vaults and deposits with the Central Bank of Nigeria. 

1.10.8 Quantitative Directives 

These are directives from the Central Bank of Nigeria to the banks and other financial institutions under its control as to the total amount of money which they may lend. 

1.10.9 Financial System 

The channel or conduct through which the sayings of surplus sectors (the household) flow to the deficit sectors (business organizations). 

1.10.10 Monetary System 

A system whose main function is the provision of adequate stock of money or currencies i.e.