IMPACT OF QUANTITATIVE TOOLS OF MONETARY POLICY ON THE PERFORMANCE OF DEPOSIT OF COMMERCIAL BANKS IN NIGERIA
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IMPACT OF QUANTITATIVE TOOLS OF MONETARY POLICY ON THE PERFORMANCE OF DEPOSIT OF COMMERCIAL BANKS IN NIGERIA
This study will focus on the effects of quantitative tools and policies on the deposit performance of first bank of Nigeria plc and first inland bank plc, two commercial banks in Nigeria.
The government authorities or government use monetary policy in addition to other economic policies to try to steer the economy in the desired direction. The government uses banks as a conduit for the implementation of its monetary policies, and during that process, banks are subject to influence.
The purpose of this study is to determine whether and to what degree monetary policy affected the performance of commercial banks during the study period.
Determining if monetary policy had an impact on loans and advances, as well as the profit of first banks of Nigeria plc and first inland bank plc, is another goal of the research. Simple percentages are used for data analysis, and chi-square is used to test hypotheses.
Interest rates, cash reserve ratios, minimum rediscount rates, liquidity ratios, and foreign exchange rates are the monetary policy tools I’d like to deploy.
In summary, monetary policy has had a positive effect on the performance of commercial banks’ deposits in stabilising the economy.
Chapter One
1.0 INTRODUCTION
1.1 GENERAL OVERVIEW
Government policies are employed to advance goals of development that are concerned with ensuring the welfare of the populace on a variety of fronts, including socially, politically, economically, religiously, and environmentally.
Through the use of economic policy, these policies are employed to attain these objectives. They are moral persuasion, special deposits, credit controls, discount rates, open market operations (OMOs), and moral suasion.
One of the financial entities that develops policy objectives and measures their accomplishment is the banking industry.
The case study, first bank of Nigerian plc, and first inland bank plc are included in this study.
Sir Alfred Jones, a shipping mogul, established the First Bank of Nigerian Plc on March 31, 1894, as a limited liability corporation with its headquarters in Liverpool.
After merging its predecessor, the African Banking Corporation, which had been founded earlier in 1892, the bank of British West African (BBWA) began operations in the Lagos office of Elder Dempster & Company with a paid up capital of 12,000 pounds sterling.
The bank has tremendous growth throughout its initial years of operation. First Bank of Nigeria plc became the name of the bank in 1979 and 1991, respectively.
On April 20, 1988, First Inland Bank was established as a private limited liability company under the name Inland Bank (Nigeria) plc. It started doing business in October 1988, and in June 1992 it changed its legal status to a public limited liability company.
The bank and the old First Atlantic Bank plc entered into a merger agreement in 2005. First Inland Bank Plc is a joint venture between IMB International Bank Plc and NUB International Bank Limited. First Inland Bank Plc’s shares are traded on the Nigerian stock exchange. First inland bank plc, the integrated bank.
STATEMENTS OF THE PROBLEMS
1. The financial market in Nigeria is underdeveloped.
2. There are numerous instances in Nigeria where anticipated revenue is less than spending. This event has the immediate effect of increasing aggregate demand and the general price level under pressure.
3. The problem with nonbank financial institutions (NBFI), whose numbers and operations are growing. They use deposits, although they are not currently governed by the CBN, the central bank of Nigeria.
4. The monetary policy’s tardy implementation in Nigeria.
5. The failure to release the federal government’s yearly budget on time, which results in businesses ceasing operations.
1.3 OBJECTIVES OF THE STUDY
1. Attaining a higher national diploma in banking and finance at the federal polytechnic in Nekede, Owerri, is the main goal of this research.
2. To ascertain whether the first bank of Nigeria plc’s profit, along with its loan deposit and advances, have been impacted by monetary policy during the study period.
3. Lastly, to provide the required recommendations to enhance Nigeria’s monetary policy.
1.4 HYPOTHESIS
Some of the research project’s hypotheses would be described in this section.
Ho: The profitability of commercial banks in Nigeria is impacted by monetary policy tools.
Ho: In Nigeria, commercial banks’ profit-generating deposits and loans have a big impact on monetary policy instruments.
1.5 RELATIONSHIP TO OTHER STUDIES
1. Students would utilise it as a source of information when doing their research.
2. This study would be relevant to working bankers since it will reveal the monetary policy instruments that have the greatest impact on bank performance and to them in crucial decision-making situations.
3. The central bank and other monetary authorities also need it. Maintaining economic indicators within acceptable bounds is the responsibility of monetary authorities; this research will undoubtedly help them accomplish this goal because it will shed light on the best weapon for affecting the economy.
4. The stability of the financial system and, by extension, the economy as a whole, which would be important to the economy’s citizens, is one of the study’s ultimate goals.
1.6 SCOPE OF THE STUDY
A research is not anticipated to cover a discipline in the context of this study, according to Anyanwu (2000). According to this assertion, this project effort won’t cover every aspect of the investigation, but it will have a big impact on how reliable the results are.
Only two performance indicators would therefore be examined.
The phrase “Net income before taxes total assets deposit and income” is one of several.
Open market operations (OMO), required reserve ratios (RRR), cash reserve ratios (CRR), interest rate policies (IRP), and exchange rate policies (ERP) are the monetary policy instruments that would be considered in this study.
The following monetary policy tools—discount rate policy (DRP) and moral persuasion—will be omitted.
Although it is an experimental study, it is not a comprehensive experiment because I won’t need to analyse the results of the pre- and post-tests or the experiment and control groups.
Because it is a case study, the research will focus specifically on banks.
First Bank of Nigeria Plc and First Inland Bank Plc are two good examples because of their size and geographic reach. First Bank and First Inland Bank Plc both have two branches in Owerri, and the company also has other branches across the country.
LIMITATIONS OF THE RESEARCH
There are going to be limitations when doing a research project of this kind. These consist of the following: cash, time, and labour.
Due to the scarcity of money, a student will not have enough money to cover all of their expenses, much alone travel to numerous organisations as required for a research assignment.
Due to this flaw, the focus of this study will be on how quantitative tools affect the deposit performance of commercial banks in Nigeria, specifically first bank of Nigeria plc and first inland bank plc.
Such a research project cannot be completed in a short amount of time. If one really wants to write extensively about the subject, it takes time.
Additionally, some bank workers who were questioned declined to show interest in the initiative because their personal time constraints were a barrier to it.
1.8 DEFINITION OF TERMS
LAG: This is the delay between when an idea is conceived and when it is put into action.
FINANCIAL SYSTEM: This is a collective term for the market institutions, regulatory agencies, intermediaries, and dealers that make up the economy.
INVESTMENT TREND: the change in the rate of inflation, whether it is higher or lower.
LENDING RATE: This is the rate at which banks provide their clients advances.
MONEY SUPPLY: This is the total amount of money in circulation, either as a sum or as a stock.
CONTROL: This is the process of making sure that business activities go as planned in order to meet goals.
OBJECTIVES: By existing and operating, an organisation aims to accomplish these objectives.
Tools are equipment used for a specific type of task.
OPEN MARKET OPERATION: This is the central bank’s sale or purchase of government securities on the financial markets.
The primary tool for economic stabilisation, monetary policy consists of measures intended to control the amount, cost, availability, and flow of credit in the economy.
LIQUIDITY TRAPS: These are situations in which the interest rate is so low that people and businesses want to hold any additional funds in the banking system as speculative balances.
HYPOTHESIS: This is an educated estimate that the researcher made in advance and will be tested to see if it holds up or not.
STABILISATION SECURITY: These are securities that the central bank specifically issues as it sees fit in order to absorb excess liquidity in the banking system.
A capital cost to the borrower and a capital return to the saver or lender is the interest rate.
Discount rate, sometimes referred to as minimum rediscount rate or bank rate, is the amount that central banks are willing to lend or discount bills to help out financial firms.
A DEPOSIT ACCOUNT is an account where a person keeps a certain amount of money for a predetermined amount of time.
A CASH BUDGET is a specific kind of budget that is created by an organisation based on the cash on hand.
A balance sheet is a financial statement that details an organization’s operations over a given time period.
QUASI MONEY: This refers to forms of currency that are neither cash nor paper money but are nonetheless utilised for transactions and regarded as currency.
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