Monetary Policy and Deposit Money Banks Performance in Nigeria

Abstract

The purpose of the study is to examine how Nigerian deposit money banks behave in relation to monetary policy. Evidence from the study showed that the central bank has successfully used monetary policy instruments to increase the lending portfolio of DMBs to the private sector. In particular, the cash reserve ratio has been carefully adhered to by banks in Nigeria because it improved banks' performance over the long term. Another element of monetary policy that has assisted banks in maintaining their profitability is the loan-to-deposit ratio, which guarantees the private sector's unrestricted access to bank credits. However, the rate of all rates—the monetary policy rate—has not positively impacted bank lending to the private sector. This also holds true for the liquidity ratio and the exchange rate. The study comes to the conclusion that there is substantial evidence that monetary policy has positively, if unsatisfactorily, impacted DMB's performance. In order to speed up bank credits, some rates must still be checked.