Abstract

<p>The research looks at the monetary policy instruments employed by the Nigerian monetary authorities and their effects on <br>turnover ratio of commercial banks in Nigeria. The objective of the research was to examine the effects of monetary policy <br>instruments-money supply, liquidity ratio, monetary policy rate, and cash reserve ratio- on commercial banks turnover ratio in <br>an attempt at finding out the true nature and the extent monetary policy instruments have been successful in impacting on <br>banking performance in Nigeria. To give the reader a more informed knowledge on the area, the conceptual, theoretical and <br>empirical literature was examined. The methodology used the ordinary least square (OLS) since it enabled the researcher to <br>capture the essence of the work effectively in addition to its high level of simplicity and global acceptability. Moreover, a 5% <br>confidence level is adopted for the study. OLS became imperative for use in this work as the theoretical foundation for this <br>procedure is well highlighted in many articles of Akanbi &amp; Ajagbe (2012), Amassoma, Wosa &amp; Olaiya (2011); Ekpung, Udude &amp; <br>Uwalaka (2015); Okoye &amp; Udeh (2009), &amp; Olokoyo (2012). The analysis done showed that monetary policy had some level of <br>effect on bank performance proxied by Turnover rate (TOR), Bank Assets (BAS) and Loan and Advances (LADV). It is equally <br>indicative of the fact that the relationship is instrument sensitive, i.e, some monetary policy tools work better on some bank <br>performance indexes while such may not work on some other ones. <br>LRR was negative and equally significant in relation with Bank Turnover Rate (TUR), while Money supply (M2) alone had a <br>positive and significant in relation with Bank Assets (BNKAS), on the other hand, Cash Reserve Ratio (CRR) alone had a negative <br>and significant impact on Bank Loan and Advances (LADV). The apriori expectation between the afore mentioned variables in <br>relation to the dependent variables were met. The negative relationship between liquidity ratio and turnover ratio also indicates <br>that when CBN increases the ratio banks liquid assets reduces which hampers their ability to create more loans and engage in <br>more investment thus reducing their turnover hence conforms to expectation. In conclusion, it was apparent that the high level <br>of forged and decorated balance sheet in the past could have made the monetary policy tools less effective and results unreliable. <br>However, with the various reforms after the financial crises, the prudential guidelines and implementation of a uniform financial statement reporting, the monetary policies of the CBN have tend to yield better results. With the recent introduction of the <br>Monetary Policy Rate (MPR) by the CBN as the major tool for signaling its monetary stance, the need for a monetary policy <br>reaction function which clearly depicts the decision making intention of the Bank would assist economist and financial markets <br>in predicting the future path of monetary policy. Recommendations of study include that the Central Bank of Nigeria (CBN) <br>should adjust the monetary policy rate by reducing the cash reserve ratio which will increase liquidity to enable the commercial <br>banks to discharge their lending and investment duties effectively to the public. The CBN and the Ministry of finance should <br>work more closely to objectively articulate policies in the same economic direction. The CRR should be complementing the Open <br>Market Operations (OMO) in ensuring that excess liquidity or lack of it in the banking system is minimized, that way Money <br>Supply (M2) will be more effective as a tool on measuring other performance indicators. The policies that may affect banks loans <br>which are necessary for economic development should be checked. Effective monitoring of banks loans performance should be <br>carried out while toxic assets should be followed up prompting to reduce cases of loss loans and assets. The CBN should ensure <br>that more regulations and supervision are carried out on the banks regularly so as to avoid the manipulated financial reports as <br>noted in our findings</p>