ASSESSING THE EFFECTS OF MONETARY POLICY ON BANK PROFITABILITY IN NIGERIA

Abstract

This study examines the link between monetary policy and bank profitability in Nigeria from 1980 -2023. The objectives were to;  assess the effects of monetary policy rate , money supply growth, cash reserve ratio, and treasury bill on commercial banks profitability. Applying Vector Autoregression (VAR) on the variables, the study found that overall, monetary policy conduct was effective in enhancing commercial banks performance in profitability over the period.  Our findings show that throughout the study, key variables of monetary policy instruments were strong in driving bank profitability. Monetary policy rate produces marginally positive impact on profit that is statistically insignificant. The study recommends that such monetary policy instruments as monetary policy rate, money supply and treasury bill should be used in moderation in continue to help the banking sector to grow in delivering value addition to the general economy.