IMPACT OF MONETARY POLICY ON BANKS PROFITABILITY IN NIGERIA
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TITLE PAGE
IMPACT OF MONETARY POLICY ON BANKS PROFITABILITY IN NIGERIA
BY
---
EE/H2013/01430
DEPARTMENT OF ----
SCHOOL OF ---
INSTITUTE OF ---
DECEMBER,2018
APPROVAL PAGE
This is to certify that the research work, "impact of monetary policy on banks profitability in nigeria" by ---, Reg. No. EE/H2007/01430 submitted in partial fulfillment of the requirement award of a Higher National Diploma on --- has been approved.
By
--- . ---
Supervisor Head of Department.
Signature………………. Signature……………….
……………………………….
---
External Invigilator
DEDICATION
This project is dedicated to Almighty God for his protection, kindness, strength over my life throughout the period and also to my --- for his financial support and moral care towards me.Also to my mentor --- for her academic advice she often gives to me. May Almighty God shield them from the peril of this world and bless their entire endeavour Amen.
ACKNOWLEDGEMENT
The successful completion of this project work could not have been a reality without the encouragement of my --- and other people. My immensely appreciation goes to my humble and able supervisor mr. --- for his kindness in supervising this project.
My warmest gratitude goes to my parents for their moral, spiritual and financial support throughout my study in this institution.
My appreciation goes to some of my lecturers among whom are Mr. ---, and Dr. ---. I also recognize the support of some of the staff of --- among whom are: The General Manager, Deputy General manager, the internal Auditor Mr. --- and the ---. Finally, my appreciation goes to my elder sister ---, my lovely friends mercy ---, ---, --- and many others who were quite helpful.
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TABLE OF CONTENT
Title Page
Certification ii
Dedication iii
Acknowledgement iv
Table of Content vi
CHAPTER ONE
1.1 Background of the Study 1
1.2 Statement of Problem 5
1.3 Objectives of the Study 5
1.4 Significance of the Study 6
1.5 Scope of the Study and Limitations 6
1.6 Hypothesis 7
1.7 Statements of Research Question 8
CHAPTER TWO
Literature Review
2.1 Preamble Objectives of Monetary Policy 9
2.2 Major Objectives of Monetary Policy 10
2.3 Basic Techniques of Monetary Policy 11
2.4 Nigeria’s Monetary Policy Experience
Under Direct Control 12
2.5. Limitation of Direct Monetary Control 14
2.6. A Review of the Major Monetary Policy 15
2.7 Transmission Mechanism of Monetary Policy 23
2.8 Assessment of the Degree of the Effectives 27
CHAPTER THREE
3.1 Research Methodology 31
3.2 Sources of Data 31
3.3 Types of Data Collected 32
3.4 Data Analysis Technique 32
3.5 Statement of Hypothesis 32
CHAPTER FOUR
Data Presentation, Analysis and Interpretation
4.1 Introduction 34
4.2 The Case Study 35
4.3 Data Presentation 36
4.4 Data Analysis and Presentation 39
CHAPTER FIVE
Summary, Conclusion and Recommendation
5.1 Summary of Findings 51
5.2. Conclusion 52
5.3. Recommendation 53
BIBLIOGRAPHY 55
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
A country’s financial sector is the major channel through which funds are mobilized for borrowing and lending transactions. A poorly regulated or managed financial sector or one with insufficient capital for the risks can increase a country’s vulnerability to financial crises.
Improved financial sector regulation and supervision ensures the financial institution take adequate steps to manage risks. Appropriate financial sector policies can stop help to establish deep and liquid domestics capital markets which will reduce the incentive for excessive borrowings. On general, improved financial sector regulation and supervision can help prevent crises by making national economics less vulnerable to adverse developments at home and abroad.
Financial sector crises have occurred in many countries in recent times; both in developed as well emerging market economics.
These crises have resulted in substantial macro-economic and fiscal costs.
Bank failures are widely perceived to have a greater adverse effect on the economy than the failure of the other types of businesses.
They are viewed to be more damaging than other failures because of the fear that they may spread in domino. Fashion through out the banking system, feeling solvent went as well as insolvent banks. Thus, the failure of an individual bank introduces the possibility of system. Wide failures or systematic risk. Bank failures have been and will continue to be a major public policy concern in all countries in the last two decades reflects primarily regulatory or government failure rather than market failures. One major element of regulation and supervision in the last of decade has been the issuance of a set of prudential measures aimed imparting strength to the banking and system and soundness through greater transparency and accountability.
The prevention of the re-occurrences of banking problems requires a better developed market assisted prudential regulations as well as appropriate incentives. For examples part of the strategy to strengthen the banking system in Nigeria include restructuring the system of inspection particularly the offsite surveillance, enhancing the role of external auditors and strengthening corporate governance, internal controls and audit procedures.
The financial system is described as the gamut of financial instruction, financial instruments and financial markets. The role of the financial system in the economy is appreciated the light of the important functions it performs in financial intermediation, capital formation management of payment systems and facilitating the effectiveness of monetary policy.
The most important functions of the financial intermediation, which facilitates the mobilization of resources from those who have (surplus units) and their transfer to those who do not have (deficit units) this influencing savings and investments and facilitating the achievements of the growth objectives of the economics of policy.
Banks constitute the payment systems, which consist of rules institutions and technical mechanism for the transfer of money for the settlement of personnel and business transactions.
The payment system represents on important nerve centre of the economy, providing the link between the real and financial sector the more efficient the payment system, the greater the confidence of the public and the faster the pace of economic activities.
The financial system also provides the institutional frame work through which monetary policy is conducted. In other words, thus system constitutes the channel through which monetary policy action are transmitted to the real sector to achieve price stability facilitate output growth and enhance employment opportunities. Monetary policy is one of the instruments of economic management employed by the monetary authorities especially the Central Bank, to keep the growth of money supply at a level that consistent with the absorptive capacity of the economy.
Monetary policy can be defined as the management of the expansion and the contraction of the volume of money circulation direction through various techniques/policy instruments.
1.2 STATEMENTS OF PROBLEM
The CBN’s attempt to regulate and implement policies in the banking sector has being faced with some challenges. The present oligopolistic structure of our banking system. The poor management and settlement systems do not foster adequate and timely response to monetary authorities to quake the pulse of the financial system for the purpose.
Another major challenge for the regulations is ensuring transparency in information discloses though timely and accurate reconciliation of financial returns to the CBN by the financial system, transparency reporting of financial data promotes the ethics good corporate governance and enhances the prospects for effective contingency plan for managing system distress.
1.3 OBJECTIVES OF THE STUDY
The impact of monetary policy will be looked at with references to banks profitability. Therefore, the objectives of the study will be to:
- Examine ways by which government authorities banking operations in Nigeria.
- To create awareness of the fact that monetary policy helps to stern distress in banks.
- To further inform the CBN and government on ways to ensure banks’ compliance with monetary policy.
1.4. SIGNIFICANCE OF THE STUDY
The study will be relevant, as it would seek to:
- Educate and inform banks on the importance of monetary policy on their profitability, which is their main goal.
- To create awareness of the fact that monetary policy helps to stern distress in banks.
- To further inform the CBN and government on ways to ensure banks’ compliance with monetary policy.
1.5. SCOPE OF THE STUDY AND LIMITATIONS
This study will investigate how monetary policy affects banks profitability in Nigeria, its challenges and possible solutions the compliance with monetary policy using a case study of guaranty trust bank plc for the period.
In this research, some factors might pose problems for the researcher to carry out a very comprehensive research.
- Financial constraint
- Time constraint
1.6 HYPOTHESIS
The impact of monetary policy on the profitability of banks in Nigeria is stated in two contrasting hypothesis, which are concretely measured in this study.
The null (HO) or alternative (Hi) hypothesis.
HYPOTHESIS 1
HO: That monetary policy by the CBN will not lead to increase in profit margin of banks.
HI: That monetary policy by the CBN will lead to increase in profit margin of banks.
HYPOTHESIS 2
HO: That there is no significant impact of monetary policy on guaranty trust bank’s profitability.
HI: That there is a significant impact of monetary policy on guaranty trust bank’s profitability.
1.7 STATEMENT OF RESEARCH QUESTION
HYPOTHESIS 1
HO: That monetary policy by CBN will not lead to increase in profit margin of banks.
HO: That monetary policy by CBN will lead to increase in profit margin of banks.
HYPOTHESIS 2
HO: That there is no significant impact of monetary policy on guaranty trust bank’s profitability.
HO: That there is a significant impact policy on guaranty trust bank’s profitability.
CHAPTER TWO: The chapter one of this work has been displayed above. The complete chapter two of "impact of monetary policy on banks profitability in nigeria" is also available. Order full work to download. Chapter two of "impact of monetary policy on banks profitability in nigeria" consists of the literature review. In this chapter all the related work on "impact of monetary policy on banks profitability in nigeria" was reviewed.
CHAPTER THREE: The complete chapter three of "impact of monetary policy on banks profitability in nigeria" is available. Order full work to download. Chapter three of "impact of monetary policy on banks profitability in nigeria" consists of the methodology. In this chapter all the method used in carrying out this work was discussed.
CHAPTER FOUR: The complete chapter four of "impact of monetary policy on banks profitability in nigeria" is available. Order full work to download. Chapter four of "impact of monetary policy on banks profitability in nigeria" consists of all the test conducted during the work and the result gotten after the whole work
CHAPTER FIVE: The complete chapter five of design and construction of a "impact of monetary policy on banks profitability in nigeria" is available. Order full work to download. Chapter five of "impact of monetary policy on banks profitability in nigeria" consist of conclusion, recommendation and references.
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