AN EVALUATION OF MONETARY POLICY AND ITS IMPACT ON BANKING ACHIEVEMENT IN NIGERIA
- Project Research
- 1-5 Chapters
- Quantitative
- Regression
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 3000
Background to the study
ACHIEVEMENT in the banking industry is influenced by a variety of external variables. Within the scope of this study, profitability will serve as the ACHIEVEMENT indicator for financial institutions. The regulatory framework within which banks operate is the primary element that has a direct influence on profitability. This structure may be broken down into two major categories, which are the monetary policies and the banking policies. Because of the critical responsibilities that banking institutions play in the process of intermediation, these policies are often anchored via banking institutions in every economy (Anyawu, 2022). By using this method, banks play extremely essential roles in the process of evaluating the value of money as well as the production of high-powered money. This is the primary job of banks, which entails the collection of cash from units that have excess income and the distribution of this surplus to units that have surplus expenditure. The Central Bank, in the interest of the general public, does, however, exercise control over such licenses to generate a great many. For instance, by utilizing various instruments of monetary policy, financial institutions are mandated to keep reserves in the form of cash stashed away in their vaults or as a deposit at the Central Bank. The amount of these reserves must be equivalent to a predetermined percentage of the banks' various categories of deposits.
Monetary policy is concerned with the discretionary management of the money supply that is exercised by monetary authorities in order to accomplish economic objectives that have been expressed or desired. Governments make an effort to exert control over the money supply because they are under the impression that the pace of expansion of the money supply has a substantial bearing on the rate of inflation. As a result, monetary policy refers to the activities taken by the government that are intended to have an effect on the manner in which the financial sector behaves (Adam, 2022). The following policies are wanted: "in an effort... to shift the trends of the same monetary variables in certain directions in order to induce the desired behavioral change in the monetary sector." It is the responsibility of the Central Bank to implement an appropriate monetary policy that is in line with the primary economic goals of attaining real growth in Gross Domestic Product; a low inflation rate; and a stable balance of payment situation. This is the case regardless of whether a direct or indirect technique is being used to limit the availability of credit and the amount of money in circulation. The primary purpose of monetary policy is to guarantee, over the course of time, that the increase in money and credit will be sufficient to meet the long-term requirements of a developing economy while maintaining price stability ( Nyong, 2021).
It is necessary for banks to adjust their portfolios of assets and liabilities in order to meet the profitability objective within the constraints of solvency and liquidity in order to maximize profits for the bank's shareholders. This is necessary in order for banks to be able to meet their regulatory requirements. This purpose of maximizing profits is significantly impacted by the position taken by the Central Bank with regard to monetary and banking policy. Other variables, such as the management effectiveness of the bank, the cost of labor, the size of the bank, and the amount of capital invested in banking, do impact the profitability of the bank. The degree to which a bank is successful in gathering deposits and putting those deposits to profitable use is one of the most important factors that goes into establishing the amount of profitability that a certain bank enjoys (Uchendu, 2022).
In spite of this, the influence that the variables of monetary policy have on the profitability of banks and the efficacy of monetary policy will be investigated as part of this research. The level of a bank's profitability is often recognized as one of the most crucial measures of its ACHIEVEMENT: It is defined as the capacity of banks to produce a surplus of income over expenditures or excess returns earned in the course of carrying out their commercial operations while simultaneously meeting their liquidity and solvency requirements.
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