KIJHUS Volume. 3, Issue 2 (2022)


Jibrin Suleiman Hassan, Oyedele Oloruntoba


Monetary Policy Financial Performance Cash Reserve Ratio Inflation Rate Interest Rate Return on Asset

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Abstract: The roles of monetary policy of the apex bank in any economy cannot be overstated in view of the importance of banks in regulating the price liquidity by accumulating a large number of small deposits and giving credit to those who require the funds. This study examines the effect of Monetary Policy on Financial Performance of Deposit Money banks quoted in Nigeria from 2008-20120. The independent variable (Monetary Policy) was represented by Cash Reserve Ratio, Inflation Rate and Interest Rate, while, the dependent variable (Financial Performance) was measured by Return on Asset. The sample size comprise the Ten (10) deposit money Banks quoted on the Nigerian stock exchange as at 31st December, 2020. The panel data were retrieved from the annual reports of the sampled banks. The data were analysed by Pooled Ordinary Least Square multiple regression and the results showed that Cash Reserve Ratio has a positive significant effect on Financial Performance, Inflation Rate has an insignificant negative effect on Financial Performance, while, Interest Rate has an significant negative effect on Financial Performance of the samples banks. The study concluded that Monetary policy is a strong determinant of financial performance of Nigerian banks. The study recommended that Management of Deposit Money banks in Nigeria should prepare themselves against the effect of increased Cash Reserve Ratio as it has a significant positive effect on their performance. Government should strive to control Inflation rate as its effect on banking operations is negative albeit insignificantly and that the Central bank should keep Interest rate from fluctuation so widely as it has significant negative effect on banks financial Performance.