THE IMPACT OF MONETARY POLICY ON THE PROFITABILITY OF BANKS IN NIGERIA
Banks are the most regulated of all business in Nigeria. This is because of the nature of banking itself and its centrality to the effective functioning of the economic system.
The importance and centrality of the banking system in the development of an economy is obvious and beyond dispute. It plays some roles which include financial intermediation provision of an efficient payment system and facilitating the implementation of monetary policy
On intermediation the banking system mobilizes savings form the surplus and channel them to investment in operating the payment mechanism the system serves as a medium for exchange and in execution of monetary policy, the system serves as agents through which the policies are disseminated
However without banks arrangement savings and investment will not only be inefficient but may lead to less than optimum resources allocation.
Accordingly an efficient and effective system is indispensable not only for the promotion of efficient intermediation but also for the protection of the depositors encouragement of a healthy competition and the stability of economy.
The degree of success of bank in performing the above functions however depends on the financial and regulatory environment which in itself is a function of the totality of the environment in which it operate.
1.1 BACKGROUND OF THE STUDY
1.2 STATEMENT OF PROBLEM
Banks generally play important role in the development of any economy. Hence the industry is so sensitive that it is said to be the backbone of every economy. The failure of bank (commercial banks in particular) may therefore bring about failure of the entire economy hence the need to control the activities of commercial banks to ensure effective economic development.
Consequently the government had always tried to have effective control over commercial banks; but due to the banks quest for project maximization they have not always complied with guidelines used by the monetary authorities.
This problem of in compliance equally made it relatively impossible for the achievement of the objectives of monetary policy.
However, the problem which the research wants to point out is the handicap being faced by commercial banks in trying to strike a balance between liquidity and profitability as imposed by the governments monetary policy