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THE IMPACT OF MONETARY POLICY GUIDELINE ON THE PERFORMANCE OF COMMERCIAL BANK IN NIGERIA. (A CASE STUDY OF OCEANIC BANK PLC).
The existence of an effective and efficient banking industry is necessary for every economy because it creates the necessary environment for economic growth and development through its role in intermediating funds from surplus economic units to deficit economic units. However, this stimulates investments, economic growths and employment as well as international trade and payment and explains why every economy takes inerest in creating and nurturing it. Thus, this research revolves around the impact of monetary policy measures on the performance of commercial banks inNigeria. However, we know that banks make use of monetary policy instrument to achieve their objectives and goals Moreso, commercial banks use profitability to measure their performance within their territory. Consequently, the researcher makes use of data collection. Data were collected from extracts, from textbooks, relevant journals, periodicals, newspapers and central bank of Nigeria ( CBN) quarterly and annual publications.
The management of any economy entails the anticipation of a well meaning as well as devising various policies and measures that will ensure the efficient utilization of the nations resources with a view to:
- Promoting economic growth.
- Ensuring full employment
- Maintaining both domestic and external Monetary stability.
Section 2© CBN degree 24 of 1991 as amended stated that one of the principal objectives of the bank (CBN) shall be to promote monetary stability and a sound financial system inNigeria. While part v section 3 (a) of the same degree provides the “the Bank (CBN) shall have power to carry out the Open Market Operation (OMO) for the purpose of maintaining stability in the economy of the country and without prejudice of the generality of the forgoing, the bank may also for that purpose issue, see, repurchase, amortise or redeem securities to be known as stabilization securities. And the securities shall be issued at a such rate of interest and under such conditions of maturity, amortization, negotiability and redemption as the bank may deem appropriate, such monetary policies must not allow axcess money supply in the economy which will cause rise in prices (inflation) or allow inadequate money supply which lead to stagnation in the economy thereby retending the growth and development of the economy.
1.1 BACKGROUND OF THE STUDY
Monetary policies is a deliberate government policies through the Central Bank ofNigeriadesigned to regulate the economy by controlling the cost volume and direction of credit. This policy is normally issued at the beginning of each financial year and within the year as it is deeded fit. This policy guideline stipulates the area where bank credit is to be increased or decreased or lowered. In order to realize government’s macro-economic objectives, Central Bank stands a the head of the banking system and it is owned by government. It is regarded as the Apex banking Institution, which direct and regulates, coordinate the activities of other financial institutions. As a financial organ of the government it carries out all financial transaction of the government and also monitor and supervise the operation and performance of other banks. Central Bank uses monetary policy tools through the financial institutions to control money supply in the economy.
As excess supply of money will result in an excess demand for goods and services, which would cause rising prices and a deterioration of the balance of payment position.
Conversely, an inadequate supply of money could induce stagnation in the economy thereby retarding growth and development. As a result of these possibilities, the monetary authonities must as much as possible keep the money supply at any point in time at a level that will maintain both internal and external stability.
BACKGROUND INFORMATION ABOUT THE CASE STUDY HISTORY OF THE BANK.
Oceanic Bank was incorporated as a private company on 26th March, 1990. the bank was issued it’s commercial banking licence on 10th April, 1990 and commenced operation on the 12th June, 1990. in January 2001, the bank’s commercial banking license was upgraded to a universal banking to provide a raider range financial services. On March 4th, 2017 the bank was converted to a public limited liability company and became listed by the introduction on the Nigeria Stock Exchange on 25th June, 2017.
NATURE of BUSINESS
The bank operate via a network of 53 branches.it’s objective is to render corporate and investment banking services to all its customers.
The banks wide range of service includes fund management, tax banking, personal banking, investment banking and electronic banking.
The bank is able to provide these comprehensive services at all of its branches through the deployment of state of the out technology.
The bank currently has correspondent relationship with Deutsche BankNew York,Londonand Frankport, and belgolaise Bank London. To enhance the bank’s turn around time, relationship management units are structure along specific industry such as oil and gas manufacturing, real estate and trading, non profit organization public sector, consumer banking and corporate finance.
PRODUCT AND SERVICE
The product and service that Oceanic Bank offers to its clients are reflective of the banks subsisting business focus with emphasis on the top and middle tien companies for asset creation and public sector, corperate and high net worth individual for liability generation. The bank places a premium on creating and sustaining the best top of the range financial and electronic products in the industry. These products, custom made to meet the special need of the bank’s customers has distinguished oceanic Bank customers from its contemporaries as evidenced by the bank steady earning growth.
Some of the product and services offered by the bank are:
- Western Money Union Transfer.
- Oceanic Education Plan.
- Oceanic Quality Life Scheme.
- Oceanic Pear Account.
- Oceanic ESA Account.
- Oceanic PTC Account
- Oceanic Value Card.
- Retail Banking.
- Whloesale Banking
- Tax Banking
- Technology Services.
- Small and Medium industry Equity Investment Scheme.
- Information Technology.
Oceanic bank’ telecommunication system relies on VSAT and microwave technology while the backbone deploys the sum Serengeti sum five 6899 server complimented by various high-end windows net-work servers. This backbone offers reliability and availability of data on all transactions.
The bank also uses an oracle based banking application software called Financial developed by infuses, one of the India’s largest software companies. The software has on-line real time facilities, which runs on a secure window compatible platform. This is made possible with the bank huge investment.
Hence the problem of this study is that of monetary policy guidelines on the performance of commercial banks, with Oceanic bank as a case study.
1.2 RESEARCH QUESTION
This research work therefore tries to address such problems.
1) What inpact has CBN monetary Policy made on commercial banks and the economy as a whole?
2) Is the CBN monetary policy effective and efficient in the performance of its traditional and developmental function?
3) What constitute the CBN’s monetary policy?
1.3 OBJECTIVE OF THE STUDY
- To find out whether monetary policy measures on the performance of commercial bank can promote economic growth.
- To discover how monetary policy can be used to ensure full employment.
- To evaluate critically the role of commercial bank as regards compliance with this policies.
1.4 SCOPE OF THE STUDY
The study is suppose to cover all the branches of the CBN, review the past and the present polices of CBN and their bearing on the performance of Commercial Banks in Nigeria – via Oceanic Bank Nigeria Plc.
1.5 SIGNIFICANCE OF THE RESEARCH
Null hypothesis (Ho): Monetary Policy Guidelines does not have any impact on the performance of Commercial Banks in Nigeria.
Alternative hypothesis (Hi): monetary Policy guidelines have impact on the performance of commercial Banks inNigeria.
1.6 LIMITATION OF THE STUDY
However, this study is limited to only few branches of CBN policies due to the followings:
I. Financial comstraint: the researcher has insuffient finance to carry out the work.
II. Distance between the branches of CBN, commercial bank and the project base.
III. Time Constraint: as a full time student, the student is occupies with a lot of academic work and other numerous assignments, which negatively affected the time allocated to this project.
1.7 DEFINITION OF TERMS
MONETARY POLICY: It refers to the combination of measures designed to regulate the value, supply and cost of money in an economy, in cognizance with the expected level of economic activities hence, it is designed to influence the behavior of the monetary variable on aggregates.
FISCAL POLICY: It is the part of government policy, which is connected, with the raising of revenue through taxation and other means as well as deciding on the level and the pattern of expenditure in a given fiscal year.
Central Bank: Central Bank can be defined as the Apex banking institution whose main role is to promote sound financial condition for the growth of the country.
COMMERCIAL BANK: May be defined as a financial institution which deals in money and credit and which receives from public institution and organization some of which are payable on demand by cheque.