EFFECT OF MONETARY POLICY ON THE PROFITABILITY OF COMMERCIAL BANKS IN NIGERIA.

Abstract

The continuous decline in the profitability of Commercial Banks in Nigeria has become a source of great concern. Commercial Bank’s profitability has continued to decrease with many banks becoming bankrupt. This study evaluates Effect of Monetary Policy Variables on the profitability of Commercial Banks in Nigeria. The study utilized the Ex-post facto research design. The research employed secondary data, which were obtained from the annual financial statement and reports for a 10-year period (2014–2023). The Panel regression model was employed to test the effect of monetary policy variables on the profitability of Commercial Banks in Nigeria. The result shows that Open Market Operation (OMO) have no significant effect on Return on Assets (ROE). Furthermore, it revealed that Cash Reserve Ratio (CRR) have a significant effect on the Return on Equity (ROE). The study concluded that Open Market Operations (OMO) did not exhibit statistically significant effects, in contrast, the Cash Reserve Ratio (CRR) emerged as a statistically significant determinant of the dependent variable. The Study then recommends among others that the Central Bank of Nigeria (CBN) could strategically leverage CRR adjustments as a key tool to manage the dependent variable.