DOES MONETARY POLICY RATES DECREASE THE ASSETS OF DEPOSIT MONEY BANKS IN NIGERIA; EVIDENCE FROM AUTOREGRESSIVE DISTRIBUTED LAG MODEL ANALYSIS

Abstract

The study examined the impact of monetary policy decisions in stimulating the assets of deposit money banks in Nigeria 2000-2020. While the specific objectives are to: Measure the impact of interest rate spread on assets of deposit money banks in Nigeria. Determine the impact of exchange rate on assets of deposit money banks in Nigeria. Investigate the impact of inflation rate on assets of deposit money banks in Nigeria. The model used in this study is Auto regressive distributed lag as a form of multiple regression models. It is a special type of regression called auto regressive distributed lag. Result revealed that Interest rate had a negative and non-significant impact on assets of deposit money banks in Nigeria, Exchange rate had a positive and significant impact on assets of deposit money banks in Nigeria, Inflation rate had a negative and non-significant impact on assets of deposit money banks in Nigeria,. The implication of findings revealed that if the government fails in their monetary policy decisions, it will go a long way to affect deposit money banks and also economy. The study concluded that monetary policy decisions play serious significant effects on the assets of deposit money banks in Nigeria. It was recommended that government should create reasonable credit to private sector and therefore regulates the interest rate to be charged. Exchange rate has a significant effect on Insurance profitability in Nigeria. This study recommend that public enlightenment campaigns should be done by government directing people about the availability of money kept for agricultural loans and various credits so as to control black market in exchange rate. It was recommended that effective policies such as policies that will encourage manufacturers to have access to bank credits without democratic bottleneck will go a long way to provide efficiency in the system and hence improves or control inflation; however, gradual control of inflation through mopping up excess liquidity will be done by the monetary authorities to enhance the growth of deposit money bank assets.