The Impact of Monetary Policies on Nigeria Deposit Money Banks (a Case Study of Zenith Bank Plc Bank)
CHAPTER ONE
Objective of the study
The general objective is to determine the impact of monetary policy on the performance of Deposit Money Banks (DMBs) in Nigeria. While the specific objectives of the study are as specified below:
- To determine the impact of Cash Reserve Ratio (CRR) on the performance of DMBs in Zenith bank.
- To determine the impact of money supply (M2) on the performance of DMBs in Zenith bank.
- To determine the impact of Central Bank Exchange Rate (EXR) on the performance of DMBs in Zenith bank.
- To establish the impact of Monetary Policy Rate (MPR) on the performance of DMBs in Zenith bank.
- To determine the moderating impact on the relationship between monetary policy and performance of DMBs in zenith bank
CHAPTER TWO
REVIEW OF RELATED LITERATURE
The Concept of Financial Performance and Measurement
According to Kenton (2020), financial performance is a subjective measure of how well a firm can use assets from its primary mode of business and generate revenues. He added that the term could be also used as a general measure of a firm’s overall financial health over a given period. Corporate Financial institute sees financial performance as a complete evaluation of a company’s overall standing in categories such as assets, liabilities, equities, expenses, revenue and overall profitability which is measured through various businessrelated formulas that allow users to calculate exact details regarding a company’s potential effectiveness; while Didin, Jusni and Mocklas (2018) see it as the achievement of the company financial performance for a certain period covering the collection and allocation of financial measure by capital adequacy, liquidity, solvency, efficiency, leverage and profitability. 12 The key ratios commonly used by bank analysts t o evaluate different dimensions of financial performance includes profitability, capitalization, asset quality, operating efficiency, liquidity and interest sensitivity. However, the commonly used ratios to measure performance are the profitability ratios which include: Return on Equity (ROE), Return on Assets (ROA), Net Interest Margin (NIM), Profit Margin and Asset Utilization. The first three are commonly used by researchers (Machiraju, 2008). Return on Equity (ROE) indicates the rate of return on equity capital and is significant in the context of the objective of maximization of share value. Equity is the sum of share capital, preferred shares, paid-in surplus, retained earnings and reserves for future contingencies; it is a financial ratio that is concerned with how much profit a company generates relative to the total amount of shareholders’ equity invested. It is found on the balance sheet. Any business with a high return on equity is more likely to be one that is capable of generating cash internally. Thus, the higher the ROE the better the company is in terms of profit generation and by extension, its performance. Machiraju (2008) explained it as the ratio of Net Income after Taxes divided by Total Equity Capital.
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.
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 the impact of monetary policies on Nigeria deposit money banks (a case study of zenith bank plc bank). 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 impact of monetary policies on Nigeria deposit money banks (a case study of zenith bank plc bank)
Summary
This study was on the impact of monetary policies on Nigeria deposit money banks (a case study of zenith bank plc bank). Five objectives were raised which included: To determine the impact of Cash Reserve Ratio (CRR) on the performance of DMBs in Zenith bank, to determine the impact of money supply (M2) on the performance of DMBs in Zenith bank, to determine the impact of Central Bank Exchange Rate (EXR) on the performance of DMBs in Zenith bank, to establish the impact of Monetary Policy Rate (MPR) on the performance of DMBs in Zenith bank and to determine the moderating impact on the relationship between monetary policy and performance of DMBs in zenith bank. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from Zenith bank in Uyo. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
DMBs are highly regulated and thus operate within the framework of monetary policy and prudential guidelines which are usually determined by the monetary authority. In Nigeria, the responsibility for the administration of monetary policy is saddled on the shoulder of the Central Bank of Nigeria (CBN). Changes in the monetary policy, which is usually applied to the monetary policy instruments by the CBN, over the years, had impacted and has continued to impact the performance of DMBs either positively or negatively. Consequently, the investigation of the impact of monetary policy on the performance of DMBs in Nigeria became necessary
Recommendation
Firstly, all the instruments of the monetary policy used in the study are statistically significant with the exception of exchange rate. Management of DMBs should be mindful of every change in the monetary policy, such as money supply, MPR and CRR and act appropriately so that the positive impact of the policy, as seen in money supply, is maximised and eventually leads to improvement in performance while the negative impact in terms of MPR and CRR is minimised such that its impact on performance will be the bearest minimum. Secondly, owners of DMBs must ensure that their banks are managed by competent, seasoned and qualified management team who understand the monetary policy implications of the monetary authority and are capable of strategizing ways of using any 74 policy change to the advantage of the bank through improved performance; and also having the ability to implement effective and efficient customer service, funds utilizations, good customer relations, etc. to attract and retain large and quality customer base. Thirdly, since the study concluded that bank size has a weak significant positive moderating effect on the relationship between monetary policy and financial performance of DMBs in Nigeria, the management of DMBs should fully engage in any strategy or activities that will lead to increase in their assets or strive to be optimally leveraged if that will increase their balance sheet size reasonably. Similarly, owners must also ensure expansion and increased equity significantly through right issues.
References
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