The Effects of Monetary Policy on Bank Lending and Economic Performance in Nigeria

Authors

  • Samuel Oluwapelumi Olofinlade
  • John Adebayo Oloyede
  • Michael Ojo Oke

Keywords:

Monetary policy; Economic performance; Monetary policy rate; Prime lending rate; Money supply

Abstract

The study investigated the effects of monetary policy on bank lending and economic
performance in Nigeria for the period of 35 years which covered 1984 to 2018. The study addressed
broad money supply, monetary policy rate, prime lending rate and inflation rate as monetary policy
indicators while real gross domestic product was regressed as economic performance. The data were
gathered from Nigeria Central Bank Statistical Bulletin and National Bureau of Statistics. The study
employed two models to analyse the effect of monetary policy on bank lending and economic
performance respectively by applying the estimation techniques of Augmented Dickey Fuller (ADF)
stationarity test and regression analysis. Evidence from model one positioned that money supply and
inflation rate have significant influence on bank lending while and monetary policy rate had
insignificant influence on bank lending. The second model discovered that money supply has
significant influence on economic performance whereas other variables of prime lending rate,
monetary policy rate and inflation rate have negative and insignificant effect on economic
performance under the study period. However, the study concluded that monetary policy positively
and significantly influenced economic performance in Nigeria. It was therefore recommended that
Nigeria’s banks should align to government vision of price stability, as well as facilitating the
regulatory and supervisory frameworks to secure a strong financial sector for efficient intermediation.

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Published

2020-05-26

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Section

Business Administration and Business Economics