Monetary Policy in Nigerian Banking Industry (a Case Study of First Bank)
CHAPTER ONE
Objective of the Study
The objectives of the study are;
1. to ascertain the impact of monetary affect the banking industry
2. to ascertain the impact of monetary on Nigeria economy
3. to identify the channel through which monetary policy influences the performance of banking sector in Nigeria.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Concept of Monetary Policy
Monetary policy is the macroeconomic policy laid down by the Central Bank of any nation. It involves management of money supply and interest rate and is the demand side of economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity (The Economic Times, 2018). Monetary policy being a major economic stabilization weapon involves measures taken by the Central Bank to regulate and control the volume, cost, availability and direction of money and credit in an economy to achieve some specified macroeconomic policy objectives and to counter all undesirable trends in the economy. The direction of monetary policy is dictated by the prevailing economic situation and policy objective which have remained broadly the same over a considerable number of years. In Nigeria, authorities have enunciated and implemented a myriad of inflationary policies in an attempt to transcend desired economic growth and development.
According to Akomolafe et al (2015) the stance of monetary policy refers to either expansionary or contractionary actions of the Central Bank to control money supply. Expansionary monetary policy is a set of actions by the monetary authority to increase money supply in the economy. It is conventionally used to stimulate economic activity, usually in a recession. Contractionary monetary policy on the other hand seeks to reduce the level of money supply in the economy. It is conventionally used to reduce inflationary pressures in the economy.
Over the years, the CBN has conducted its monetary policy towards achieving these objectives. More recently, the Bank has refocused on achieving price stability, while at the same time balancing it with other macroeconomic objectives of the Government. In summary, monetary policy in the Nigerian context refers to the actions of the Central Bank of Nigeria to regulate the money supply, so as to achieve the ultimate macroeconomic objectives of government. Several factors influence the money supply, some of which are within the control of the central bank, while others are outside its control. The specific objective and the focus of monetary policy may change from time to time, depending on the level of economic development and economic fortunes of the country. The choice of instrument to use to achieve what objective would depend on these and other circumstances. These are the issues confronting monetary policy makers.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine monetary policy in Nigeria banking industry. First bank forms the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain monetary policy in Nigeria banking industry. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of an monetary policy in Nigeria banking industry
Summary
This study was on monetary policy in Nigeria banking industry. Three objectives were raised which included: to ascertain the impact of monetary affect the banking industry, to ascertain the impact of monetary on Nigeria economy and to identify the channel through which monetary policy influences the performance of banking sector in Nigeria. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from first bank. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
In compliance with the objectives of this study, we have been able to examine, determine and analyze the impact of banking sector performance and economic development in Nigeria. Also identify the channels through which monetary policy influences the performance of banking sector in the Nigerian economy by examining the changes in banks deposit liabilities and its results in the changes of monetary policy and also articulate policies that will enhance the effectiveness of monetary policy on commercial banks performance in the banking sectors in the Nigerian economy
Recommendation
Based on the findings of this study for efficient and sustainable improvement in the performance of banking sectors in the Nigerian economy, we recommend the Effective and sustainable monetary policy capable of ensuring growth and development in the banking sectors should be adopted; In addition to effective deposit rate, incentives should be given to the public in form of higher interest on deposit in order to encourage and mobilize more funds from the public; Banking sectors should strengthen and improve on its awareness mechanism to educate the public on the need, benefit and essence of imbibing the banking culture; Administration of monetary policy should be such that is flexible to enable the commercial banks to discharge their duties effectively to the public; A monetary policy adopted should aim at stabilizing and stimulating a realistic exchange rate for the banking sectors in the Nigerian economy; and Stipulation of Minimum Discount Rate by the Central Bank of Nigeria (CBN) should be such that would promote growth and development of the banking sectors in the Nigerian economy.
References
- Akuta, P. A. (1993). The Challenge of Monetary Policy Since 1986: CBN Economic and Financial Review, 31(4): 321 – 339.
- Anyanwu, J. C. (1993). Monetary Economies, Theory, Policy and Institutions. Onitsha Hybrid Publishers Limited. Banking Operations Department (December, 2005). CBN Statistical Bulletin, Lagos, Volume 16: 38 – 39.
- Central Bank of Nigeria (2004). Facts File on Bank Re-capitalization. A Publication of the Central Bank of Nigeria. Central Bank of Nigeria Statistical Bulletin (December, 2004). Volume 15, Abuja.
- CBN, Annual Report and Statement of Accounts (2006) and (various editions), Abuja. Alhaji Garba Imam, Executive Director (Operations and Management Service), Nal Bank Plc. Consolidation of Banking Industry Will result in low interest rate, Financial Standard, 5(41), August 2nd 2004.
- Ezeudoji, F. V. (1994). The effects of Monetary Policy and the Performance of the Banking sectors in Nigeria, 32(3): 268 – 278.
- CBN Economic and Financial Review. Federal Government of Nigeria (1999). Banking and Other Financial Institution Decree Section 61 of BOFID.
- Financial Standard (2006). Monday, March 6.
- Gbosi, A. N. (1998). Banks Financial Crisis and the Nigerian Economy Today. Owerri: Corporate Impressions.
- Jhingan, M. L. (2004). Monetary Economic 6th Edition. Delhie: Vrinda Publications (p) Limited.
- Jhingan, M. L. (2004). Macro-Economic Theory. 11th Revised Edition Delhi: Vrinda Publications (p) Limited.
- Koutsoyiannis, A. (1997). Theory of Econometrics. Second Edition, New York: Palgrave Publishers Limited.
- Nnanna, O. J. (2005). Beyond Bank Consolidation: The Impact on Society in CBN 4th Monetary Policy Conference. Abuja, CBN’s Bullion, 30(3): July – September, 2006.