Monetary policy and stability of the Nigerian banking sector in the post-COVID-19 era
Résumé
Type of article: Research ArticleAbstractThe post-COVID-19 era in Nigeria has witnessed several reforms and policies from the apex bank aimed at enhancing economic recovery. However, concerns have been raised about how these policies have impacted the stability of the banking sector. This study investigated the effect of monetary policies on banking sector stability in Nigeria in the post-COVID-19 era. The policy tools included monetary rate (CBN benchmark rate), nominal exchange rate, interest rates, and cash reserve ratio. Banks’ stability was proxied by an aggregate z-score of four broad banking soundness indicators (capital adequacy ratio, loan-to-deposit ratio, liquidity ratio, and profitability ratio). Monthly data from January 2021 to February 2024 on these variables were analyzed through the Autoregressive Distributed Lag approach to co-integration technique. Results revealed a significant one-period lagged error correction term (t-stat = –5.76, prob = 0.00) with a 45.2% adjustment speed from short-term to long-term. Further results showed that monetary rate (t-stat = 0.83; prob = 0.016) and nominal exchange rate (t-stat = 4.75; prob = 0.017) both directly and significantly affected the bank soundness index. However, interest rate (t-stat = –3.83; prob = 0.838) and cash reserve ratio (t-stat = –0.61; prob = 0.55) exhibited inverse and non-significant effects on the bank soundness index. The study concluded that monetary rate and nominal exchange rate are key determinants of banking sector stability in Nigeria since the post-COVID-19 era. Therefore, Nigeria’s apex bank needs to apply a more cautious approach to fixing monetary policy rates while focusing on boosting its foreign reserves to strengthen the local naira.
Citer ce document
Accès au document
Texte intégral en lecture en ligne, réservé aux abonnés SPHAERO et aux membres de l'institution. Se connecter
Statistiques
Consultations : 1
Téléchargements : 0