The impact of monetary banks in Nigeria economy. The term monetary policy can be defined as the combination of measures designed to regulate the supply of money in an economy. It is specifically designed to regulate the availability of credit in order to attain staffed objectives.
It involves the expansion or contraction of money supply, the manipulation of interest rate to make borrow ring easier and cheaper, depending on the prevailing condition of the economy it guides the channeling of funds to the growth sectors for increased out put.
The main purpose of monetary policy is as follows.
There fore I want to find out the impact of monetary policy on the profitability of commercial banks
The following are the reason of these study.
the significance of monetary policy cannot be over emphasized.
This because the objective of monetary policy such as prices stability, employment and balance of payment equilibriums are necessary prerequisite of economic development.
The people that will benefit form this project are the monetary authority and the government.
The bank also will benefit from it because it help in reducing interest rate by so doing it encourage borrowing and those interested individuals who intend borrowing will be encouraged and the community will benefit too.
Generally banks play important roles in the development of any nation especially the commercial bank.
The banking industry is a very sensitive one and is often said to be the backbone of every economy. Therefore the failure of banks may bring about the failure of the entire nation, thus the need to control the activities of banks to enhance effective development.
Successive government in Nigeria have always tried to have effective control of banking operation especially in their loans and advances and investing activities as these affect the freedom and ability of these banks to make profits. Thus, the credit guidelines issued by the monetary authorities had the problem of compliance, banks sometime ignore abiding with the provision of these guidelines to pursue highly profitable business ventures even when such meant exceeding their credit ceiling.
This problem of non compliance equally made it relatively impossible to achieve the goals of effective economic development which is the essence of controlling the banking industry.
This problem therefore is what interest me and that is what this project wants to address and the handicap being faced by banks in trying to strive a balance between liquidity find profitability as imposed by the CBN monetary policy.
Monetary policy : is the combination of measure designed to regulate the supply of monetary an economy.
Profitability : the ability of a bank to make profit or gain form its operation and services within a given period of time.
Bank : dealers of debt financial institution which have the primary function of the safe keeping of customers money and other valuables
Guidelines: stipulated principles or information directing the affairs or operation of an organization towards the achievement of a goals.
Loan: is a term lending extended to customer by banks, it is usually paid back with interest within a stipulated period
Investment: the act lays of funds for the accomplishment or promise high return on principal and interest.
Liquidity constraint: means that bank must be able to must depositor withdrawals and legitimate loan requests immediately and continuously without incurring sizeable cost.
Effectiveness: the extend to which the desired result is realized or achieved
Advance: short term in form of financial extended by commercial bank to their customer it earns high rate of interest and is similar to overdraft.