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THE IMPACT OF QUANTITATIVE TOOLS OF MONETARY POLICY ON THE PERFORMANCE OF DEPOSIT OF COMMERCIAL BANKS IN NIGERIA (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)
Monetary policy is measures designed by the central authority to regulate the quality of money in circulation. This study is on the effect of monetary policy on the banking industry. The objective of the study is to determine the effect of monetary policy on the commercial banks and its effectiveness especially in controlling the quality of money in circulation. In this work the research collected data through the use of questionnaire. The questionnaires were administered personally, by the researcher, which gave him an opportunity to analyze that policy is a potent tool and a measure in countering the operations of commercial banks. Based on the findings, the researcher recommends among other the regulatory body should make sure that the banks are there to formulate monetary policies, so that sanity will be maintained in the banking industry and confidence restored.
1.1 Background of the Study
Government policies are used to pursue development objective of government that bothers on meeting the welfare of the citizens they could be socially, politically, economically, religious wise, environmentally population and so on. These policies are used to credit control and discount rate. The banks are one of the financial institutes that formulate the policy objectives and achievement of these goals. This research involves the case study of First Bank Nigerian Plc.
First Bank Nigerian Plc was incorporated as a limited liability company on March 31, 1894 with the head office in Liverpool by Sir Alfred Jones a shipping magnate. It started in the office of Elder Dempster and company in Lagos under thee cooperate name of Bank of British West African (BBWA) with a rapid up capital of 12,000 pounds sterling. After absorbing it predecessor the African banking cooperation, which was established earlier in 1892. In the early year of operation the bank has an impressive growth. The changing of the banks name occurs in 1979 and 1991 to First Bank Nigerian Plc. It commenced business operation on October 1988 and was converted to a public limited liability company in June 1992.
2005 the bank went into a merger arrangement with former Atlantic Bank Plc, IMB international Bank Plc. The sharing of the new banks are quoted on Nigeria stock exchange consolidated.
1.2 Statement of problems
1. The under-developed nature of the Nigeria financial market.
2. There is very much presented in Nigeria where by expected revenue fall below expenditure. This occurrence leads to direct injection to aggregate demand and increase pressure price level.
3. The issue of non bank financial institution (NBF) which are ruing in numbers and operations. They adopt deposit but up till now, they are under the central banks of Nigeria (CBN).
4. There is delay in the conduct of monetary policy in Nigeria.
5. There is delay in releasing the reserve government annual budget which causes economic units to suspend their activities.
1.3 Objective of the study
1. To determine monetary policy has any influence on the profit of the banks or Nigeria Plc and also on its, loan deposit and affiances.
2. Finally to make necessary recommendations that would improve monetary policy in Nigeria.
3. It is also vital to central bank and other monetary authorities. Monetary authorities have this work of keeping economic indicators within reasonable limits. This research would definitely be of assistance to the monetary authorities in achieving this aim because it will provide an insight as to which tool would be most appropriate for influencing the economy.
1.4 Research Question
1. Does monetary policy influence the Nigeria Economy?
2. Does their impact effectively contribute to the small and medium industries in Nigeria?
3 Does the impact of monetary policy influence the profit deposit as well as loan and advances of commercial bank?
4. Does monetary policy influence on the performance of commercial banks in Nigerian
1.5 Research hypotheses
1. Ho: Monetary policies have influence on profit deposit of commercial banks in Nigeria.
Hi: Monetary policies do not have influence on profit deposit of commercial banks in Nigeria.
Ho: There is significant relationship between monetary policy and profit of commercial banks in Nigeria
Hi There is no significant relationship between monetary policy and profit of commercial banks in Nigeria
1.6 Significance of the study
1. Student would use it for reference purpose when conducting their researcher.
2. Practicing bankers would find relevance in this study, theists because it will help to fine out which monetary policy instruments influence bank performance of the most and to them in important matters of decision.
3. An ultimate aim of this study is to bring about stability in the banking system and hence the economy as a whole and this would be of significance to the citizens of the economy.
1.7 Scope of the study
As Anyanwu (2000) especilied out a research is not expected to cover a discipline in the cause of the study in line with this statement of this project work and would not cover every thing on this study, it will significant determine the reliability of its findings. Hence only two performance indicator would be analyzed. Despite the fact that there are other like “nets” income before taxes total assets deposit and in come.
The monetary policy tools that would be involved in this study are open market operation (OMO) required ration (RRR) the cash reserve ration (RR) interest ratio policy (IRP) and exchange rate policy (ERP), the following policy instrument will be excluded such as discount rate Policy (DRP) and moral suasion.
It is an experimental study, it is not a full experiment since I would not require a pre-test and post-test analysis nether will it require an experiment and control group analysis. It is a case study research and will therefore be particular about banks.
First bank of Nigeria plc and with there size and spread of operations is a representative case study. It has two branches in Owerri that is first bank and has two branches, in Owerri and has other branches in the nation.
1.8 Limitation of the study
In conducting a research work of this nature certain restrictions are bound to affect the study. These include the following
- Ø Money
- Ø Time and
- Ø Effort
Money being a scarce commodity, a student will not have enough money to meet up their entire financial obligation by traveling to many organizations which is a pre-requisite for a research project. As a result of this defect, this study will center on the impact of quantitative tools on the performance of deposit of commercial banks in Nigeria with reference to First Bank of Nigeria Plc.
A research work of this nature cannot be accomplished within a short period of time. It requires time if one actually wants to write exhaustively on the topic.
Also some employees of the bank and to who questions were asked declined interest every attempt made to persuade them proved abortive, due to their own time schedule being a limitation to the project.
1.9 Definition of Terms
LAG: This is the period between the conception of an idea and the implementation.
Financial System: This is the conglomeration of market institutions, regulatory authorities, intermediates and the dealers in economy.
Inflation Trend: The upward or downward i.e. increase in the rate of inflation
Lending Rate: This is a rate at which banks make advance to their customers.
Money Supply: This is the summation or total amount or stock of money circulation.
Control: This is the process of insuring that firm activities conform to as planned in ensuring that objectives are achieved.
Tools: These are instrument used for a particular kind of work.
Open Market Operation: This is defined as the selling or buying of government securities in the financial markets by the central bank.
Monetary Policy: this can be defined as the major economic stabilization weapon which involves measure designed to regulate the volume, cost availability and direction of money and credit in the economy.
Liquidity Traps: This is defined as a case where the interest rate falls so low that individuals and business wish to hold any new money created in the banking system as speculative balance.
Stabilization Security: These are securities specifically issued by the Central Bank at time it deems fit for the purpose of moping up excess liquidity in the banking system.
Interest Rate: This is a price of capital to the borrower and return on capital to the saver or lender.
Discount Rate: This is also known as minimum rediscount rate or bank rate is a rate at which Central Bank offer financial assistance to financial institutions through loans or discounting bills.
Deposit Account: This is an account in which a person keeps a specific sum of money for an agreed period of time.
Cash Budget: This is a type of budget prepared by an organization based on the availability of cash.
Balance Sheet: This is a financial statement that shows the activities of an organization within a specified period.
Quasi Money: These are money that is not cash or paper-money but are also used for transaction purpose and also regarded as money.