The Effects of Monetary Policy on the Contributions of Banks’ Lending to Economic Performance in Nigeria

Abstract

Monetary policy typically focused on economic performance, price stability, and external balance (Balance of Payments Equilibrium), among other things. The study's goal is to look at how banks contribute to Nigeria's economic performance through lending. The study used an econometric method to examine the impacts of monetary policy on bank lending contributions to economic performance, using Augmented Dickey Fuller (ADF), unit root test, and regression analysis as estimation techniques. Broad money supply, monetary policy rate, prime lending rate, and inflation rate were used as monetary policy indicators, whereas real gross domestic product was used as an economic performance metric. The information utilized came from the Nigerian Central Bank's Statistical Bulletin and the National Bureau of Statistics. Statistical evidence from the result regression outcome revealed that banks’ lending, money supply, monetary policy rate have positive contributions to economic performance in Nigeria while inflation rate contributed positively but insignificant to economic performance in Nigeria during the studied period. The result findings further strengthen and accommodate more investment and lucrative projects into the economy which on the long run will provide job creation, reduce unemployment, reduce poverty level and contribute to the economic development of Nigeria if put onto use. The study therefore concluded that monetary policy has positive contributions to banks’ lending towards Nigeria economic performance. It was recommended that the CBN needs to supervise thoroughly the banks’ activities to enable them comply with all the legal regulatory frameworks and monetary policies. Not that alone, the design of monetary policy and its implementation should be made in such a way that the conflict of target is avoided.