The Impact of Monetary Policies on Commercial Banks

Topics: Bank, Monetary policy, Economics Pages: 9 (1155 words) Published: May 31, 2013


The desire to develop a viable monetary policy has reached it unprecedented limit in the

economy, money as a medium of exchange emerged with the waves to organize a political

and economical institution which will enforce a unique legal tender. Nowadays, money has

played an indispensable role in propelling the activities of the economy.

Monetary policy is the major pre-occupation of the Central Bank of Nigeria (CBN), the

extent to which they enforce their role successfully would depend on the statutory power

conferred on them by the establishing law. It involves the management of the expansion and

contraction of the money in circulation.

Monetary policy may yield better result during period of expansion, prosperity (Boom) and

recession. These policies are more adequate for solving today’s complex economic problems

and have blended very well in tackling contemporary domestic and global economic


Generally, for a sound and prudent enhancement of activities in commercial bank,

coordination of monetary policies can create an integral path for a vibrant economy.


Distress in commercial bank in Nigeria has called for a serious controversial debate, as to

what should be the cause of this distress. A pilot study about this business phenomenon’s

reveals that most of these failures are associated with the monetary policies implemented.

Why then do these policies fail to enhance the corporate culture of banks activities and other

related problem will constitute the statement of this research.

a) The inconsistencies of these monetary policies by the authority: consequence on activities

of commercial banks.

b) The negligence exhibited by some of commercial banks in implementing some of these

policies established by the authority and its adverse effect on the entire system of the


c) The problem of irregular assimilation of information to depositors/borrowers who operate

various accounts with the bank on the authorities directives.


Monetary policies impacts differently on the activities of bank because of their functions in

the money market where majority of Nigerians operates, either as a saver or loan receiver or

both. Besides that, the country’s banking system and overall economy has been affected by

endemic corruption, inadequate infrastructures, political instability and poor macroeconomic

management. It is against this that the purpose of the study is to find out the following:

1. To evaluate the instrumental efficiency of monetary policies on the activities of

commercial banks.

2. To investigate the effect of monetary policies on the economy development through

the commercial bank.

3. To investigate the role of monetary policies on commercial banks activities.


1. To what extent has the instruments of monetary policies contributed to the activities of

commercial banks?

2. Do the monetary policies have effect on economic development?

3. Is there any relationship existing between monetary policies and commercial banks



The hypotheses are based on the stated questions;

1) H0: The monetary policy instruments do not have significant impact on the activities of

commercial banks.

H1: The monetary policy instruments have significant impact on the activities of

commercial banks.

2) H0: The monetary policies do not facilitate economic development.

H1: The monetary policies facilitate economic development.

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