Basically, a bank has a two-fold function in connection with receiving deposits and making loans, there are many services that bank render which are fundamental important to normal function of our economic system. For example, bank provide a safe place for the deposits of fund, which temporarily are not needed by their owners, through the bank services in changing money, individual may obtain currency of coin, in the denomination desired. Also through cheques, depositors can pay their bills, reducing carrying of money from place to place, thereby minimizing risks. The banks also assist in the book keeping operations of his depositor record of both cash and credit funds received and disbursed and equally rendering receipts in the form of cancelled cheques for bill discharged.
Banks equally assist in facilitating credit transaction through their services to customer in obtaining information with regard to the financial responsibility of prospective purchased of the customer goods and services. Finally, banks grant loans to individuals, merchant, manufacturer, and others. A banking service made possible by the accumulated funds of depositors and the ability of banks to create money and use the same money created to make profit, which is the aim of going into business.
If these services aim at making profit is received by the public without interruption, the banks of the country must be managed wisely. The management of an individual’s bank represented by its board of directors and its executive officer must be familiar with banking practices and procedures. They must have a through knowledge of the problem of banking industry and finance in general and its customer and their territory in particular. In the light of this information, the management should formulate sound policies for the safe conduct of the bank in order to protect the depositors fund, provide adequate compensation for their employees, serve the community and earn a fair return for the stockholders. They should equally integrate properly the government monetary and fiscal policies in their policies for proper blending of their operation. This would help to form a sound policy for the banks operation, which is perhaps the most important in the banking industry.
Banking operation and profit making has been in existence even in ancient times. To establish this point, Anyanwaokoro (1996:6) observed that ‘’ in the bible’’ (mark 12 verse 15-17) reference was made in the new testament to money changers in the temple of Jerusalem. Mentions was also made of silver coins that had image of Caesar which was presented to Jesus Christ, concerning these coins Jesus said ‘’give to Caesar what belong to Caesar’’, in the parable of ten talents (Matthew 14 verse 14-29) Jesus Christ explained how the master of a lazy servant rebuked the servant for not banking his money. Many authors believe that modern banking operation and profit making originated from ancient goldsmith of London, although the London goldsmith version is questionable, since London was not among known world in bible times, we will still discuss that version because it present to us the basic principle guiding the operation of modern banks. All this profit oriented activities of bank are being controlled by central bank and for central bank to control them effectively; appropriate measures must be put in place.
Monetary policy refer to the measures designed to regulate the value, supply and cost of money in an economy in consonance with the expected level of economic activity as well as achieving the following objectives
In the contemporary economic development environment, studies have shown that bank is the life wire of an economy, both the developed and developing economy and that no economy can grow economically without banking business. The banking sectors have over the year encounter some problem due to ineffective control and non compliance of CBN guidelines. Commercial banks like first bank of Nigeria plc. Sometimes have problem of low profit margin. The failing of the banking sector will lead to economic depression. This is because banking sector is seen as the life wire of the economy.
It is in response to the above problem that informed the study on the subject matter. ‘’ the effect of monetary policy on bank profit in Nigeria’’ with special reference to first bank plc.
1.3 OBJECTIVES OF THE STUDY
The purpose of the study is to show that within the context of Nigeria’s economic growth and development, commercial banks have help a lot through their various functions which is aimed at making profit. The study will also show how the commercial bank’s activities are being controlled by the monetary authorities through various instruments and the way these measures affect commercial banks profit, therefore the objectives of the study includes:
1.4 STATEMENT OF HYPOTHESIS
1
: monetary policy measures in Nigeria are not effective1
: monetary policy measures in Nigeria are effective2
: there is no significant relationship between monetary policies and commercial banks loan and advances2
: there is significant relationship between monetary policies and commercial bank loans and advances3
: monetary policy instrument are effective in actualizing the profit of the commercial bank3
: monetary policy instrument are not effective in actualizing the profit of the commercial bank
This study is extracted to explain the effect of monetary policy on bank profit in Nigeria, the result and recommendation from this study will beneficial to policy maker on the type of policy to be introduced. The result will also be relevant to entrepreneurs, future investor and the entire public, it will help researcher in other related field to carry out further research on the subject matter in the future.
This study is an empirical one which concerns the effect of monetary policy on commercial banks profit and the research work is restricted to first bank plc. Nnewi Ananbra state
In the course of this study, the researcher encountered problem which in one way or the other challenge the easy flow of this work. These include: