The Impact of Monetary Policy on Commercial Bank Lending in Nigeria ( A Case Study of First Bank of Nigeria Plc)

Abstract

This study investigated the impact of monetary policy on commercial bank lending in the Nigerian context. The study aimed to test the effectiveness of some monetary policy component and instruments and how it affects commercial bank loans and advances in Nigeria. The model used is estimated using Nigeria commercial banks loans and advances (CBLA) and other variables such as broad money supply (M2), minimum rediscount rate (MMR), Liquidity ratio of commercial bank (LR), Exchange rate (EXR), and cash reserve ratio of commercial banks for the period of 1975 2009. The study hypothesizes that the specified independent variables mentioned above, have no significant positive impact on the dependent variable (CBLA). From the regression analysis which was done using SPSS tool, the model was found to be significant though the magnitude is not much. This work has the following findings >- i, There is non-significant positive impact of broad money on commercial bank lending in Nigeria as Broad money coefficient is 0.903, and a t-value of.958. ii. There is non-significant positive impact of exchange rate on commercial bank lending in Nigeria as exchange rate coefficient is 0.340, and a t-value of 1.372. iii. there was positive correlation between minimum rediscount rate and commercial bank lending as the there is non-significant positive impact of minimum rediscount rate on commercial bank lending in Nigeria as minimum rediscount rate coefficient is 1.408, and a t-value of 0.504. iv. There is non-significant positive impact of liquidity ratio of commercial banks on commercial bank lending in Nigeria as liquidity ratio coefficient is 1.074, and at-value of 0.96-1. v. There is non-significant positive impact of cash reserve ratio of commercial banks on commercial bank lending in Nigeria as cash reserve ratio coefficient is 1.300, and a t -value of 0.590. 171e study then suggests that there should be closer consultation and cooperation between commercial banks and the regulatory authorities so that the effect of regulatory measure on commercial banks will be taken into account at the stage of policy formation and policy makers and others should consider other variables, whether monetary policy variables or others like infrastructural variables, standard of living, entrepreneurship development and others as a determinant of the volume of commercial hanks loans and advances in Nigeria.