Effect of monetary and fiscal policy on the performance of deposit money banks in nigeria
Material type:
TextPublisher: Ibafo Department of accounting and finance 2020Edition: Mr. Olurin EnitanDescription: ix,;47p. tablesSubject(s): Social Science -- FinanceSummary: Abstract
Deposit Money Banks are very important in an economy as they mobilize savings for productive investments and facilitating capital flows to various sectors in the economy, thus stimulating investments and increase productivity. The operations of Deposit Money Banks are guided by monetary policy actions under the Central Bank of Nigeria directives. The purpose of this study was to investigate the effect of monetary and fiscal policies on the performance of Deposit Money Banks in Nigeria. Deposit Money Banks are profit-motivated institutions and their response to monetary and fiscal policies largely influences their profit margins. The study analyzed the response of five deposit money bank’s performance to monetary and fiscal policies concerning their performance from 2009 to 2018. Deposit rate (DR), foreign exchange rate (FEXR), Money supply (MS), Annual budget (AB) are used as proxies for monetary and fiscal policies. Return on Asset (ROA) is used to represent deposit money banks’ performance. The study employed ex post facto research design. The study focused on five deposit money banks selected at random. The study made use of secondary data extracted from the Central Bank Statistical Bulletins. Regression and correlation analysis was conducted to study the relationship between monetary, fiscal policies, and performance of the deposit money banks. The findings of the study showed that that none of the monetary and fiscal policy instruments have a statistically significant impact on the return of average assets which proxy for the bank’s performance. The study recommended that Central Bank of Nigeria should broaden their horizon in the use of enhanced monetary policies that will go a long way to stimulate the real sector growth which will have an impact on the financial sector growth coupled with the methodologies employed by Central bank of Nigeria in forecasting inflation need to be made more dynamic to take into cognizance the recent dynamic nature of the economy.
Keywords: Deposit money bank, financial performance, fiscal policy, monetary policy
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Abstract
Deposit Money Banks are very important in an economy as they mobilize savings for productive investments and facilitating capital flows to various sectors in the economy, thus stimulating investments and increase productivity. The operations of Deposit Money Banks are guided by monetary policy actions under the Central Bank of Nigeria directives. The purpose of this study was to investigate the effect of monetary and fiscal policies on the performance of Deposit Money Banks in Nigeria. Deposit Money Banks are profit-motivated institutions and their response to monetary and fiscal policies largely influences their profit margins. The study analyzed the response of five deposit money bank’s performance to monetary and fiscal policies concerning their performance from 2009 to 2018. Deposit rate (DR), foreign exchange rate (FEXR), Money supply (MS), Annual budget (AB) are used as proxies for monetary and fiscal policies. Return on Asset (ROA) is used to represent deposit money banks’ performance. The study employed ex post facto research design. The study focused on five deposit money banks selected at random. The study made use of secondary data extracted from the Central Bank Statistical Bulletins. Regression and correlation analysis was conducted to study the relationship between monetary, fiscal policies, and performance of the deposit money banks. The findings of the study showed that that none of the monetary and fiscal policy instruments have a statistically significant impact on the return of average assets which proxy for the bank’s performance. The study recommended that Central Bank of Nigeria should broaden their horizon in the use of enhanced monetary policies that will go a long way to stimulate the real sector growth which will have an impact on the financial sector growth coupled with the methodologies employed by Central bank of Nigeria in forecasting inflation need to be made more dynamic to take into cognizance the recent dynamic nature of the economy.
Keywords: Deposit money bank, financial performance, fiscal policy, monetary policy
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