EFFECT OF MONETARY POLICY ON FINANCIAL SECTOR PERFORMANCE IN NIGERIA

This study examined the effect of monetary policy on financial sector performance in Nigeria. The study includes all the financial sector that is deposit money banks in Nigeria as captured by the Central Bank of Nigeria Statistical Bulletin of 2025. The period of the study is 35 years (1990-2024) which were considered relevant to this study because of the availability and accessibility of the data as at the period this study was carried out. The study is established on Keynesian Theory, Monetarism/Neo-Classical Theory, New endogenous growth theory, Quantity theory of money among others. The secondary source was mainly used in this study. Secondary sources used includes previous works such as journals, CBN Statistical Bulletin Quarterly report, NDIC Annual report varying issues, unpublished materials etc. Multiple regressions were used to estimate the joint and individual effects of monetary policy variables measured by exchange rate, monetary policy rate and maximum bank lending rate on return on assets. The study revealed that the endogenous variables were significantly related with the dependent variable (return on assets). Thus, these independent variables strongly have an impact on the financial performance of deposit, money banks in Nigeria measured by return on assets. It is concluded that monetary policy is found to have long-run relationship with the financial sector performance and can be effectively used to control Nigerian financial sector thus is a veritable tool for profitability and lending control plus circulation of money. Therefore, the study recommended that the government should also consistently adopt monetary policies that will help Nigerian banks to improve on their profitability and also there is a need to strengthen monetary policy rate through effective and efficient regulatory and supervisory framework.