Table of Contents
Abstract. 2
CHAPTER ONE.. 5
INTRODUCTION.. 5
1.1 Background to the Study.. 5
1.2 Statement of the Problem... 7
1.3 Objectives of the Study.. 8
1.4 Research Questions. 8
1.5 Research Hypothesis. 9
1.6 Significance of the Study.. 9
1.7 Scope of the Study.. 10
1.8 Limitations of the Study.. 10
1.9 Organization of the Study.. 10
CHAPTER TWO.. 13
REVIEW OF RELATED LITERATURE.. 13
2.1 Introduction.. 13
2.2 Theoretical Review.. 13
2.3 Conceptual Review.. 15
2.3.1 Overview.. 15
2.4 Empirical Review.. 18
2.5 Summary of Literature Review.. 20
Chapter Three.. 21
Research Methodology.. 21
3.1 Research Design.. 21
3.2 Population of the Study.. 21
3.3 Sample Size and Sampling Technique.. 22
3.4 Data Collection Methods. 22
3.5 Instrumentation.. 23
3.6 Validity and Reliability of Instruments. 23
3.7 Data Analysis Techniques. 24
3.8 Ethical Considerations. 24
3.9 Limitations of the Study.. 25
3.10 Summary.. 25
TABLES BASED ON RESEARCH QUESTIONS.. 30
4.3 Analysis of the Respondents’ Views on Research Question one:. 30
4.4 Testing Hypothesis. 42
Discussion of Findings. 44
CHAPTER FIVE.. 48
SUMMARY CONCLUSION AND RECOMMENDATIONS.. 48
5.1 Summary.. 48
5.2 Conclusion.. 49
5.3 Recommendations. 50
REFERENCES.. 51
Questionnaire.. 54
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The Nigerian banking sector plays a pivotal role in the transmission of monetary policies, serving as a crucial intermediary between the central bank and the broader economy. This intricate relationship underscores the significance of understanding how monetary policies implemented by the Central Bank of Nigeria (CBN) impact the banking system and, subsequently, the entire economic landscape. The transmission mechanism involves various channels through which changes in interest rates, reserve requirements, and other monetary policy tools influence the behavior of banks and, consequently, the overall financial environment in Nigeria. Soludo, C. (2001).
One of the primary ways in which monetary policies affect banks in Nigeria is through the adjustment of interest rates. The CBN utilizes interest rate changes to influence the cost of borrowing and lending, thereby steering credit creation and spending. Banks respond to these alterations by adjusting their lending and deposit rates, influencing the accessibility of credit for businesses and consumers. Additionally, reserve requirements set by the central bank dictate the amount of funds that banks must hold in reserve, affecting their lending capacity. This regulatory tool serves as a lever to manage liquidity in the banking system and control inflation. Iyoha, M. A., & Oriakhi, D. E. (2010).
Moreover, the effectiveness of monetary policies in Nigeria is intertwined with the health and stability of the banking sector. The resilience of banks to external shocks, their risk management practices, and the overall financial soundness collectively impact the transmission mechanism. Research on the Nigerian banking sector's role in transmitting monetary policies becomes imperative in assessing the overall effectiveness of such policies in achieving macroeconomic objectives. Anyanwu, J. C., Oaikhena, H. A., & Oyefusi, A. (2019).
To comprehend the nuances of this relationship, scholars and policymakers delve into empirical studies and theoretical frameworks. Notable works by economists such as Soludo (2001), Iyoha and Oriakhi (2010), and Anyanwu et al. (2019) provide valuable insights into the intricate dynamics between monetary policies and the Nigerian banking sector. These references contribute to the ongoing discourse on the role of banks in transmitting monetary policies and provide a foundation for further research and policy formulation in the Nigerian context.Top of Form
Bottom of Form
1.2 Statement of the Problem
The role of banks in the transmission of monetary policies in Nigeria poses several critical challenges and questions that warrant rigorous examination. One central concern revolves around the efficacy of interest rate adjustments by the Central Bank of Nigeria (CBN) in influencing the lending behavior of banks. While the CBN employs interest rate changes as a primary tool to regulate credit creation and spending, the actual impact on the banking sector's lending practices remains a subject of scrutiny. Understanding how banks in Nigeria respond to alterations in interest rates and whether these responses align with the intended objectives of monetary policies is essential for shaping effective policy measures. Soludo, C. (2001).
Another pertinent issue is the resilience and stability of the Nigerian banking sector in the face of monetary policy shocks. The transmission mechanism relies on banks being robust and adaptable to changes in regulatory requirements and economic conditions. Examining the potential vulnerabilities in the banking sector that may hinder the smooth transmission of monetary policies is crucial for enhancing the overall effectiveness of these policies. Factors such as the level of non-performing loans, risk management practices, and the adequacy of capital buffers become critical elements to explore in assessing the banking sector's role in the transmission process and ensuring the stability of the financial system as a whole. . Iyoha, M. A., & Oriakhi, D. E. (2010).Top of Form
Bottom of Form
1.3 Objectives of the Study
The main objective of the study is to examine the role of banks in the transmission of monetary policies in Nigeria. Specific objectives of the study are:
- 1. To evaluate the effectiveness of different monetary policy instruments (e.g., interest rate adjustments, credit control measures) in influencing economic outcomes (e.g., inflation, GDP growth) through the Nigerian banking system.
- 2. To analyze the impact of structural factors within the Nigerian banking sector (e.g., bank size, competition, lending practices) on the transmission of monetary policy.
- To compare and contrast the efficiency of the bank-based transmission mechanism in Nigeria with alternative channels (e.g., stock market, exchange rate) under different economic conditions (e.g., boom, recession).
1.4 Research Questions
To guide the study and achieve the objectives of the study, the following research questions were formulated:
- To what extent do changes in the Monetary Policy Rate (MPR) translate into adjustments in lending rates offered by Nigerian banks, and subsequently, how does this affect business investment and household consumption?
- How do variations in bank size, risk appetite, and lending requirements influence the distribution of credit across different sectors and borrowers in response to monetary policy changes?
- Does the effectiveness of the bank-based transmission mechanism in Nigeria differ significantly during periods of high inflation versus low inflation, or during economic expansions versus recessions?
1.5 Research Hypothesis
The following research hypothesis was developed and tested for the study:
Ho: There is no statistical significant relationship between banks in the transmission and monetary policies in Nigeria.
1.6 Significance of the Study
The study is important for many reasons. The following are the major stakeholders this paper through its practical and theoretical implications and findings will be of great significance:
Firstly, the paper will benefit major stakeholders and policy makers in the Banking sector. The various analysis, findings and discussions outlined in this paper will serve as a guide in enabling major positive changes in the industry and sub-sectors.
Secondly, the paper is also beneficial to the organizations used for the research. Since first hand data was gotten and analysed from the organization, they stand a chance to benefit directly from the findings of the study in respect to their various organizations. These findings will fast track growth and enable productivity in the organisations used as a case study.
Finally, the paper will serve as a guide to other researchers willing to research further into the subject matter. Through the conclusions, limitations and gaps identified in the subject matter, other student and independent researchers can have a well laid foundation to conduct further studies.
1.7 Scope of the Study
The study is delimited to Union Bank, Ikeja Branch. Findings and recommendations from the study reflects the views and opinions of respondents sampled in the area. It may not reflect the entire picture in the population.
1.8 Limitations of the Study
The major limitations of the research study are time, financial constraints and delays from respondents. The researcher had difficulties combining lectures with field work. Financial constraints in form of getting adequate funds and sponsors to print questionnaires, hold Focus group discussions and logistics was recorded. Finally, respondents were a bit reluctant in filling questionnaires and submitting them on time. This delayed the project work a bit.
1.9 Organization of the Study
The study is made up of five (5) Chapters. Chapter one of the study gives a general introduction to the subject matter, background to the problem as well as a detailed problem statement of the research. This chapter also sets the objectives of the paper in motion detailing out the significance and scope of the paper.
Chapter Two of the paper entails the review of related literature with regards to corporate governance and integrated reporting. This chapter outlines the conceptual reviews, theoretical reviews and empirical reviews of the study.
Chapter Three centers on the methodologies applied in the study. A more detailed explanation of the research design, population of the study, sample size and technique, data collection method and analysis is discussed in this chapter.
Chapter Four highlights data analysis and interpretation giving the readers a thorough room for the discussion of the practical and theoretical implications of data analyzed in the study.
Chapter Five outlines the findings, conclusions and recommendations of the study. Based on objectives set out, the researcher concludes the paper by answering all research questions set out in the study.
