IMPACT OF MONETARY POLICY ON PROFITABILITY OF NIGERIAN BANKS
CHAPTER ONE
INTRODUCTION 1
References 9
CHAPTER TWO
LITERATURE REVIEW 10
2.9.1 Monetary Base 33
2.9.2 Reserves Requirement 34
2.9.3 Discount Window Lending 34
2.9.4 Interest Rates 35
References 40
CHAPTER THREE
RESEARCH METHODOLOGY 42
3.1 Research Method 42
3.2 Research Design 42
3.3 Sources of Data 44
3.4 Area of the Study 45
3.5 Population of the Study 45
3.7 Measuring Instrument 47
3.8 Validity of Instrument 48
3.9 Reliability of Instrument 48
3.10 Method of Data Collection 49
3.11 Method of Data Analysis 49
References 51
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS 52
4.1 Presentation 52
4.2 Analysis of Data 52
4.2 Test of Hypothesis 57
References 63
CHAPTER FIVE
SUMMARY OF FINDINGS CONCLUSION
AND RECOMMENDATION 64
5.1 Summary of Findings 64
5.2 Conclusion 65
5.3 Recommendations 66
Bibliography 67
Appendix 69
Questionnaire
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
According to Adekanye (1984), monetary policy is defined as policies which deal with the discretionary control of money supply be the monetary authorities in order to achieve desired economic goals. These goals may include other things, mobilization of savings, domestic price stability, maintenance of balance of payment position, and increased level of general economic activities. These policies are formulated and executed by the Central Bank of Nigeria (CBN) and they are being used to regulate the affairs of the commercial bank and as well other financial institutions control their activities.
In Nigeria, the slow growth of the bank deposit usage as money has made currency (notes and coins) the major part of money supply. Aluko (1987), stressing the importance of money, said it is a remarkable instrument which is used to influence an economy. In live of this fact, the monetary authorities ensure its (money) adequate quantity.
The quantity of money in an economy is related to the demand of public for loans and advances, and willingness of banks to meet this demand. We can therefore say that the size of money supply depends largely on the banks activities in creating or destroying deposit credits. If the money supply was responsive to the charges in economic activities, the volume of money of at any given time would reflect various individual decisions made by banks, the government, businesses and individual borrower. But instead, the supply of money is regulated by the money authorities using the monetary policy instruments as welding tools.
Davids S. Kidwill (1990) also stressing on the importance of money, said that it is a pre-requisite for establishing a highly industrialized economy and a financial system that allows for money earned as income to unite, forming purchasing power that can be spent.
The commercial banks, major players of the financial system, occupy a strategic position in the financial sector of the economy as they have the ability to create or give credit from deposits. This process is called intermediation and is the only business of banks since, currently in Nigeria the practice of Universal banking has ceased, thus, the profit banks solely depend on intermediation can act of pooling funds together from supply unit of the economy and give it out as loans to the deficit units.
At certain times, an economy could go off-course for instance, an excessive increase in the money supply without a corresponding increase in productive activities could trigger a negative effect, inflation, thus, setting the economy off-course during such period; even as observed by Ibid, Economist, talk of two ways of bringing or redirecting the economy back on track, one is through “Structural Adjustment” the other is through “Monetary Reform”. The later also regarded as the monetary policy measure, uses the qualitative cost and discretionary instruments in controlling money supply, in a bid of redirecting the economy back on track through the monetary policy measures, the apex monetary authority, the Central Bank could formulate a policy that could regard the profitability objective of commercial banks. For example, in an inflationary situation brought about an excess liquidity in the economy, the central could propose a reduction in money supply, ie. a contractionary policy. This could negatively affect the bank profitability at the period since banks solely depend on creating money (through credits) for profits.
Thus, it is feared that certain vital monetary policies, as formulated and executed by the Central Bank have had some negative impact on the economic activities of the Commercial bank in terms of profit making.
1.2 STATEMENT OF THE PROBLEM
Monetary policy is a course of action taken by the authorities to control money supply in an economy by ultimate target like inflation. This entails a series of action than influences expenditure flow into the system. Commercial banks, on the other hand, who are at the middle of the whole monetary affair who depend on the creation of funds (credits) for their profits are being times negatively affected, while the monetary authorities go ahead and forecast, formulate, execute and control the monetary policies to achieve their desired economic goals, Commercial banks who are caught up in the middle of the whole affair are busy trying to meet up with both Central Bank policies and their profit objectives. For example, if the Central bank initiate restrictive or contractionary policy, the banks will have to discourage borrowings by an increased lending rate. This, definitely, will reduce the business profit of the banks during the period. This problem is a huge one since there is little or no alternative to the means of profit making by the banks other than the intermediation role they play.
1.3 OBJECTIVES OF THE RESEARCH
In putting forth possible solutions of the above problems, the following served as the objectives of this research;
1.4 RESEARCH QUESTIONS
To find out the impact of the monetary policies on the banks profitability, this research tends to ask such questions as;
1.5 STATEMENT OF HYPOTHESIS
In solving the problems propounded on the subject of this research, the following hypotheses have been formed;
Hypothesis One
Ho: A monetary policy does not impact on the banks profitability.
Hi: A monetary policy impact on the banks profitability.
Hypothesis Two
Ho: Commercial banks do not strictly comply to the monetary policies.
Hi: Commercial banks strictly comply to the monetary policies.
Hypothesis Three
Ho: Control of interest rate at relatively low level promote bank investment.
Hi: Control of interest rate at relatively low level does not promote bank investment.
Hypothesis Four
Ho: Monetary policy has effect on the banks growth especially on commercial banks.
Hi: Monetary policy does not has effect on the banks growth especially on commercial banks.
1.6 SIGNIFICANCE OF THE STUDY
Since this work tends to expose and correct problem existing in the process of formulating and complementing monetary policies in Nigeria, its essence cannot be over emphasized. This is true because an economy cannot grow if its agencies or policies of a particular sector work in cross-opposite as is seen in the case of the policies of the Central bank as implemented through the Commercial banks as against their (ie. the Commercial bank) profitability objectives.
It is also possible that this identified or suggested problem could ignite other inadequacies in the sector.
This work tends to first identify, quantitatively this problem and suggest a way of writing the monetary policies and the Commercial banks profitability objectives so that both could work parri-pasue or in concordance.
Thus, this work will serve as a veritable source of information to policy makers, economist, bankers, educationalists, and other stakeholders having interest in the subject matter of this study.
1.7 SCOPE OF THE STUDY
This study covers the monetary system of the Nigerian environment. No doubts there are application of monetary policies that tend to be universal but then, certain of such policies have effect on different kinds of economy. This project tends to separate the Nigerian economy as its focus in order to avoid errors due to over-generalization. This expressed clearly on the monetary policies application and resultant effect in the Nigerian economy.
1.8 LIMITATION OF THE STUDY
All research works of this nature are always subject to change as long as policy formulation is respondent to changes such as technology and innovation in every contemporary world. Thus, time resource and the acquisition of materials essential to this research were the major limitation of this study, nevertheless, I was able to come across and use so many materials. However, a topic like this has so much more which I was unable to acquire this work is not totally exhausted since monetary authority is not stagnant in its policy formulation.
1.9 DEFINITION OF TERMS
The following words are defined according to their technical usage in this research contexts.
REFERENCES
Adekanye, (1984); Element of Banking in Nigeria, London: Graham Burn, pp.27-50.
Aluko (1987); “Nigerian Finance and Commerce” A Publication of Research and Data Services Ltd, Lagos Nigeria, pp.38-42.
David S. Kidwill (1990), Money and Banking: Analysis and Policy in Nigeria Context: London, George Allen & Urwih, pp.66-68.
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COMPLETE MATERIAL COST N2,500 Or $10. FRESH PROJECT MATERIAL COST 50,000 NAIRA FOR UNDERGRADUATE, OTHERS 100,000 -200,000 NAIRA.
THE NATURE AND CONSEQUENCES OF JUVENILE DELINQUENCY IN NIGERIA: A STUDY OF ENUGU NORTH LGA, ENUGU STATE
Foreign Transaction For Dollars Payment :
Bank Name: GTBank
Branch Location: Enugu State,Nigeria.
Account Name: Chi E-Concept Int’l
Account Number: 0117780667.
Swift Code: GTBINGLA
Dollar conversion rate for Naira is 175 per dollar.
ATM CARD: YOU CAN ALSO MAKE PAYMENT USING YOUR ATM CARD OR ONLINE TRANSFER. PLEASE CONTACT YOUR BANK SECURITY FOR GUIDE ON HOW TO TRANSFER MONEY TO OTHER BANKS USING YOUR ATM CARD. ATM CARD OR ONLINE BANK TRANSFER IS FASTER FOR QUICK DELIVERY TO YOUR EMAIL . OUR MARKETER WILL RESPOND TO YOU ANY TIME OF THE DAY. WE SUPPORT CBN CASHLESS SOCIETY.
OR
PAY ONLINE USING YOUR ATM CARD. IT IS SECURED AND RELIABLE.
form>DELIVERY PERIOD FOR BANK PAYMENT IS LESS THAN 24 HOURS
CALL OUR CUSTOMERS CARE OKEKE CHIDI C ON : 08074466939,08063386834.
AFTER PAYMENT SEND YOUR PAYMENT DETAILS TO
08074466939 or 08063386834, YOUR PROJECT TITLE YOU WANT US TO SEND TO YOU, AMOUNT PAID, DEPOSITOR NAME, UR EMAIL ADDRESS,PAYMENT DATE. YOU WILL RECEIVE YOUR MATERIAL IN LESS THAN 2 HOURS ONCE WILL CONFIRM YOUR PAYMENT.
WE HAVE SECURITY IN OUR BUSINESS.
CHAPTER ONE
INTRODUCTION 1
- Background of the Study 1
- Statement of the Problem 3
- Objective of the Research 4
- Research Question 5
- Statement of the Study 5
- Significance of the Study 5
- Scope of the Study 6
- Limitation of the Study 7
- Definition of Terms 7
References 9
CHAPTER TWO
LITERATURE REVIEW 10
- Empirical Study 10
- Definition of Monetary Policy 11
- Overview 12
- Theoretical Framework 14
- History of Monetary Policy 18
- Trends in Central Banking 21
- Types of Monetary Policy 25
- Inflation Targeting 26
- Price Level Targeting 27
- Monetary Aggregates 28
- Fixed Exchange Rate 29
- Gold Standard 30
- Policy of Various Nation 32
- Monetary Policy Tools 33
2.9.1 Monetary Base 33
2.9.2 Reserves Requirement 34
2.9.3 Discount Window Lending 34
2.9.4 Interest Rates 35
- Currency Board 36
- Institutional Framework for Monetary Policy Nigeria 38
References 40
CHAPTER THREE
RESEARCH METHODOLOGY 42
3.1 Research Method 42
3.2 Research Design 42
3.3 Sources of Data 44
3.4 Area of the Study 45
3.5 Population of the Study 45
- 6 Determination of Sample Size 46
3.7 Measuring Instrument 47
3.8 Validity of Instrument 48
3.9 Reliability of Instrument 48
3.10 Method of Data Collection 49
3.11 Method of Data Analysis 49
References 51
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS 52
4.1 Presentation 52
4.2 Analysis of Data 52
4.2 Test of Hypothesis 57
References 63
CHAPTER FIVE
SUMMARY OF FINDINGS CONCLUSION
AND RECOMMENDATION 64
5.1 Summary of Findings 64
5.2 Conclusion 65
5.3 Recommendations 66
Bibliography 67
Appendix 69
Questionnaire
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
According to Adekanye (1984), monetary policy is defined as policies which deal with the discretionary control of money supply be the monetary authorities in order to achieve desired economic goals. These goals may include other things, mobilization of savings, domestic price stability, maintenance of balance of payment position, and increased level of general economic activities. These policies are formulated and executed by the Central Bank of Nigeria (CBN) and they are being used to regulate the affairs of the commercial bank and as well other financial institutions control their activities.
In Nigeria, the slow growth of the bank deposit usage as money has made currency (notes and coins) the major part of money supply. Aluko (1987), stressing the importance of money, said it is a remarkable instrument which is used to influence an economy. In live of this fact, the monetary authorities ensure its (money) adequate quantity.
The quantity of money in an economy is related to the demand of public for loans and advances, and willingness of banks to meet this demand. We can therefore say that the size of money supply depends largely on the banks activities in creating or destroying deposit credits. If the money supply was responsive to the charges in economic activities, the volume of money of at any given time would reflect various individual decisions made by banks, the government, businesses and individual borrower. But instead, the supply of money is regulated by the money authorities using the monetary policy instruments as welding tools.
Davids S. Kidwill (1990) also stressing on the importance of money, said that it is a pre-requisite for establishing a highly industrialized economy and a financial system that allows for money earned as income to unite, forming purchasing power that can be spent.
The commercial banks, major players of the financial system, occupy a strategic position in the financial sector of the economy as they have the ability to create or give credit from deposits. This process is called intermediation and is the only business of banks since, currently in Nigeria the practice of Universal banking has ceased, thus, the profit banks solely depend on intermediation can act of pooling funds together from supply unit of the economy and give it out as loans to the deficit units.
At certain times, an economy could go off-course for instance, an excessive increase in the money supply without a corresponding increase in productive activities could trigger a negative effect, inflation, thus, setting the economy off-course during such period; even as observed by Ibid, Economist, talk of two ways of bringing or redirecting the economy back on track, one is through “Structural Adjustment” the other is through “Monetary Reform”. The later also regarded as the monetary policy measure, uses the qualitative cost and discretionary instruments in controlling money supply, in a bid of redirecting the economy back on track through the monetary policy measures, the apex monetary authority, the Central Bank could formulate a policy that could regard the profitability objective of commercial banks. For example, in an inflationary situation brought about an excess liquidity in the economy, the central could propose a reduction in money supply, ie. a contractionary policy. This could negatively affect the bank profitability at the period since banks solely depend on creating money (through credits) for profits.
Thus, it is feared that certain vital monetary policies, as formulated and executed by the Central Bank have had some negative impact on the economic activities of the Commercial bank in terms of profit making.
1.2 STATEMENT OF THE PROBLEM
Monetary policy is a course of action taken by the authorities to control money supply in an economy by ultimate target like inflation. This entails a series of action than influences expenditure flow into the system. Commercial banks, on the other hand, who are at the middle of the whole monetary affair who depend on the creation of funds (credits) for their profits are being times negatively affected, while the monetary authorities go ahead and forecast, formulate, execute and control the monetary policies to achieve their desired economic goals, Commercial banks who are caught up in the middle of the whole affair are busy trying to meet up with both Central Bank policies and their profit objectives. For example, if the Central bank initiate restrictive or contractionary policy, the banks will have to discourage borrowings by an increased lending rate. This, definitely, will reduce the business profit of the banks during the period. This problem is a huge one since there is little or no alternative to the means of profit making by the banks other than the intermediation role they play.
1.3 OBJECTIVES OF THE RESEARCH
In putting forth possible solutions of the above problems, the following served as the objectives of this research;
- To determine the impact of monetary policy on the profitability of the Nigerian banks.
- To examine the degree of compliance of the monetary policy by the banks.
- To determine effect of monetary policy on the banks growth especially on commercial banks.
- To find out the monetary policy employ by the central bank of Nigeria (CBN) in Enugu state.
1.4 RESEARCH QUESTIONS
To find out the impact of the monetary policies on the banks profitability, this research tends to ask such questions as;
- Does the monetary policy affect commercial banks profitability?
- Does the bank strictly comply with the monetary policies?
- Does monetary policy impart positively on the banks profitability in Nigeria?
- What effect does monetary policy have on the banks growth?
1.5 STATEMENT OF HYPOTHESIS
In solving the problems propounded on the subject of this research, the following hypotheses have been formed;
Hypothesis One
Ho: A monetary policy does not impact on the banks profitability.
Hi: A monetary policy impact on the banks profitability.
Hypothesis Two
Ho: Commercial banks do not strictly comply to the monetary policies.
Hi: Commercial banks strictly comply to the monetary policies.
Hypothesis Three
Ho: Control of interest rate at relatively low level promote bank investment.
Hi: Control of interest rate at relatively low level does not promote bank investment.
Hypothesis Four
Ho: Monetary policy has effect on the banks growth especially on commercial banks.
Hi: Monetary policy does not has effect on the banks growth especially on commercial banks.
1.6 SIGNIFICANCE OF THE STUDY
Since this work tends to expose and correct problem existing in the process of formulating and complementing monetary policies in Nigeria, its essence cannot be over emphasized. This is true because an economy cannot grow if its agencies or policies of a particular sector work in cross-opposite as is seen in the case of the policies of the Central bank as implemented through the Commercial banks as against their (ie. the Commercial bank) profitability objectives.
It is also possible that this identified or suggested problem could ignite other inadequacies in the sector.
This work tends to first identify, quantitatively this problem and suggest a way of writing the monetary policies and the Commercial banks profitability objectives so that both could work parri-pasue or in concordance.
Thus, this work will serve as a veritable source of information to policy makers, economist, bankers, educationalists, and other stakeholders having interest in the subject matter of this study.
1.7 SCOPE OF THE STUDY
This study covers the monetary system of the Nigerian environment. No doubts there are application of monetary policies that tend to be universal but then, certain of such policies have effect on different kinds of economy. This project tends to separate the Nigerian economy as its focus in order to avoid errors due to over-generalization. This expressed clearly on the monetary policies application and resultant effect in the Nigerian economy.
1.8 LIMITATION OF THE STUDY
All research works of this nature are always subject to change as long as policy formulation is respondent to changes such as technology and innovation in every contemporary world. Thus, time resource and the acquisition of materials essential to this research were the major limitation of this study, nevertheless, I was able to come across and use so many materials. However, a topic like this has so much more which I was unable to acquire this work is not totally exhausted since monetary authority is not stagnant in its policy formulation.
1.9 DEFINITION OF TERMS
The following words are defined according to their technical usage in this research contexts.
- Commercial Bank: These are federally regulated financial institution in general engages in the business of taking deposits, lending and providing other financial services.
- Credit: The provision of resources such as granting loan by one person to another.
- Monetary Authority: The entity which controls the money supply of a given currency and has the right to set interest rates and other parameters which control the cost and availability of money. Generally, a monetary authority is a central bank.
- Monetary Policy: The regulation of money supply and interest rates by the Central Bank in order to control inflation and stabilize currency.
- Money Supply: This is the total money available in the entire economy. It is also called money stock
REFERENCES
Adekanye, (1984); Element of Banking in Nigeria, London: Graham Burn, pp.27-50.
Aluko (1987); “Nigerian Finance and Commerce” A Publication of Research and Data Services Ltd, Lagos Nigeria, pp.38-42.
David S. Kidwill (1990), Money and Banking: Analysis and Policy in Nigeria Context: London, George Allen & Urwih, pp.66-68.
Download our android mobile app for more materials
ORDER NOW
COMPLETE MATERIAL COST N2,500 Or $10. FRESH PROJECT MATERIAL COST 50,000 NAIRA FOR UNDERGRADUATE, OTHERS 100,000 -200,000 NAIRA.
THE NATURE AND CONSEQUENCES OF JUVENILE DELINQUENCY IN NIGERIA: A STUDY OF ENUGU NORTH LGA, ENUGU STATE
MAKE YOUR PAYMENT INTO ANY OF THE FOLLOWING BANKS:
GTBANK
Account Name : Host Link Global Services Ltd
ACCOUNT NUMBER: 0138924237
Account Name : Host Link Global Services Ltd
ACCOUNT NUMBER: 0138924237
First Bank:
Account Name: Chi E-Concept Int’l
Account Name: 3059320631
Account Name: Chi E-Concept Int’l
Account Name: 3059320631
Foreign Transaction For Dollars Payment :
Bank Name: GTBank
Branch Location: Enugu State,Nigeria.
Account Name: Chi E-Concept Int’l
Account Number: 0117780667.
Swift Code: GTBINGLA
Dollar conversion rate for Naira is 175 per dollar.
ATM CARD: YOU CAN ALSO MAKE PAYMENT USING YOUR ATM CARD OR ONLINE TRANSFER. PLEASE CONTACT YOUR BANK SECURITY FOR GUIDE ON HOW TO TRANSFER MONEY TO OTHER BANKS USING YOUR ATM CARD. ATM CARD OR ONLINE BANK TRANSFER IS FASTER FOR QUICK DELIVERY TO YOUR EMAIL . OUR MARKETER WILL RESPOND TO YOU ANY TIME OF THE DAY. WE SUPPORT CBN CASHLESS SOCIETY.
OR
PAY ONLINE USING YOUR ATM CARD. IT IS SECURED AND RELIABLE.
form>DELIVERY PERIOD FOR BANK PAYMENT IS LESS THAN 24 HOURS
CALL OUR CUSTOMERS CARE OKEKE CHIDI C ON : 08074466939,08063386834.
AFTER PAYMENT SEND YOUR PAYMENT DETAILS TO
08074466939 or 08063386834, YOUR PROJECT TITLE YOU WANT US TO SEND TO YOU, AMOUNT PAID, DEPOSITOR NAME, UR EMAIL ADDRESS,PAYMENT DATE. YOU WILL RECEIVE YOUR MATERIAL IN LESS THAN 2 HOURS ONCE WILL CONFIRM YOUR PAYMENT.
WE HAVE SECURITY IN OUR BUSINESS.
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