Impact of Monetary Policy Instruments on Commercial Banks Performance in Nigeria: 1992-2023

Abstract

This paper examines the impact of impact of monetary policy instruments on
commercial banks performance in Nigeria from 1992 to 2023, using annual
time series data drawn from publication of World Bank annual data on money
supply, interest rate, minimum rediscount rate, liquidity ratio, cash reserve
ratio and bank performance. The data were estimated using Johansen
cointergration test. The result of estimated showed that money supply has
positive insignificant impact on banks performance. Minimum rediscount rate
and Interest rate also has positive and significant impact on banks
performance. That is, interest rate plays significant role over the years on
banks performance in Nigeria. But cash reserve ratio and Liquidity ratio has
negative and insignificant impact on banks performance in Nigeria. By
implication, money supply, interest rate, minimum discount rate, cash reserve
ratio and liquidity ratio have meaningful role on credit ability to commercial
banks in Nigeria. It is therefore, recommended that monetary authorities
through the CBN should administer with caution monetary variables that
would significantly influence commercial banks loans and advances. This
would force down interest rate.