MONETARY POLICY AND COMERCIAL BANKS PROFITABILITY IN NIGERIA

This study examines the impact of monetary policy on the profitability of commercial banks in Nigeria, focusing on the period between 2000 and 2023. Using an ex-post facto research design, the study relies on time series secondary data obtained from the Central Bank of Nigeria Statistical Bulletin. The key variables analyzed include Return on Assets (ROA) as a measure of bank profitability (dependent variable), and Money Supply (M2), Interest Rate (INT), and Inflation Rate (INF) as proxies for monetary policy (independent variables). The methodology employs multiple linear regression to evaluate the influence of these variables on bank performance, while conducting robust diagnostic tests such as unit root, normality, multicollinearity, and heteroskedasticity assessments to validate the model’s reliability. The empirical findings reveal that money supply and interest rate have significant positive effects on commercial banks’ profitability, while inflation rate exhibits a negative but statistically insignificant relationship. The model demonstrates strong explanatory power with an R-squared value of 68%, and the F-statistic confirms overall model significance. These results suggest that effective manipulation of monetary policy instruments, especially money supply and interest rates, plays a crucial role in enhancing bank profitability in Nigeria. The study recommends that policymakers strike a strategic balance in managing these tools to support a stable and growth-oriented financial sector.