ABSTRACT
The research study is directed towards a monetary policy and banking performance in Nigeria. The research investigates the effectiveness of monetary policy on the bank’s profitability by using first bank of Nigeria: as a case study. The structure of commercial bank’s general policies and principles.
The research composition was based on secondary data. The data collected from various sources was statistically analyzed with the’ multiple regression analysis.
The study found out that there is positive relationship among various economic variables including gross domestic product, interest rate, exchange rate and money supply.
The study recommends that government should pursue sound and more coordinated monetary policy. The growth rate of money supply should be kept at a level consistent with real gross domestic product (GDP) growth rate so that it will not affect the position of exchange rate adversely. The study also recommends that the government and the central bank of Nigeria should be cautious of their intervention in the Foreign Exchange Market to ensure non-violent fluctuation of the exchange rate as too much interference breeds uncertainty which’ may hamper the realization of the achievement of monetary of monetary targets.
CHAPTER ONE
1.0 INTRODUCTION
There are several factors that affect the performance of banks. In this research work profitability shall be used as the performance indicator of banks. The mostly direct factors that affect profitability are the· regulatory framework under which banks operate. This framework can be divided into two broad aspects: monetary and banking policies. In all economies, these policies are normally rooted through banking institutions because of the vital roles these institutions play in the intermediation process. Through this process, banks play very important roles in determining the price of money and creation of high-powered money. This characterizes the main functions of banks – mobilizing funds from surplus income units and channeling this surplus to deficit spending units. However, such license to create many is controlled by the Central Bank in the overall public interest. For example, through the use of monetary policy instruments, banks are required to hold reserves in form of cash in their vaults or a deposit at the Central Bank, which is equal to certain fractions of their various types of deposits.
Monetary policy deals with the discretionary control of money supply by monetary authorities in order to achieve stated or desired economic goals. Governments attempt to control. the supply of money because they believe its rate of growth has a significant effecton’ the inflation rate. ·.Therefore, monetary policy comprises those government’s actions, which are designee; to influence the bebaviour of the monetary sector. The policies-are desired: ‘in an attempt. to change the trends of same monetary variables in particular directions so as to induce the desired behavioural change in the monetary sector. The Central Bank’s role is to conduct appropriate monetary policy that is consistent with the main economic objectives of achieving real growth in Gross Domestic Product; low inflation rate and a stable balance of payment position. This is irrespective of whether direct or indirect approach is being used to control money supply and availability of credit. The main objective of monetary policy is to ensure that over time, the expansion of money and credit will be adequate for the long run needs of the _ growing economy at stable prices.
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