Authors:
Paul Oluwaseun Mathias, Basheerah Adewumi Qazeem

Addresses:
Department of Banking and Finance, Olabisi Onabanjo University, Ago Iwoye, Ogun, Nigeria.

Abstract:

This study examines the impact of monetary policy on the financial performance of Deposit Money Banks (DMBs) in Nigeria. The study's primary objective is to investigate the relationship between monetary policy instruments and the financial performance indicators of DMBs. Utilising an ex-post facto research design. Examining the relationship and impact between the dependent and independent variables, the impact of monetary policy on the performance of DMBs in Nigeria, the study used the cointegration technique, linear regression technique, and vector error correction model to analyse both the short-run and long-run relationships, respectively, among variables covering the period from 2017 to 2021. The study's findings reveal a significant positive correlation between return on assets (ROA) and interest rates. Specifically, a one per cent increase in interest rates leads to a substantial increase in ROA by 0.25948 percentage points. The study's Error Correction Model (ECM (-1)) coefficient of 0.1883 indicates that approximately 0.03% of any disequilibrium in the long-run relationship between ROA, interest rates, and broad money supply can be restored within one year. The findings highlight the importance of evaluating the impact of monetary policy decisions on the financial well-being of the Nigerian banking sector. The study suggests that to maintain a beneficial monetary policy for the banking industry, policymakers should continue to closely monitor and adjust it.

Keywords: Monetary Policy; Liquidity Supply; Interest Rates; Banking Industry; Central Bank; Official Economic Activity; Little Inflation; Expert Manipulation; Deposit Money Banks.

Received on: 25/05/2024, Revised on: 08/08/2024, Accepted on: 13/10/2024, Published on: 05/03/2025

DOI: 10.69888/FTSML.2025.000399

FMDB Transactions on Sustainable Management Letters, 2025 Vol. 3 No. 1, Pages: 1-12

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