Effect Of Monetary Policies In Nigeria Financial Institutions (A Case Study Of Union Bank Of Nigeria)

Effect Of Monetary Policies In Nigeria Financial Institutions (A Case Study Of Union Bank Of Nigeria)

Chapter One

1.0 Introduction

1.1 Background of the Study

Monetary policy is a combination of various measures adopted by the monetary authority (Central Bank of Nigeria C.B.N) in collaboration with the Federal Ministry of Finance, to manage demand via the control of volume and direction of credit in an economy in order to achieve stated objectives.

• Full employment
• Economic growth
• Price stability
• Balance of payment
• Control of inflation

Conceptually, monetary policy deals with discretion control of monetary authority in order to achieve or desired economic goal (Falegan, 1978). But the reason why government makes an attempt to control the monetary is because most government believes that its rate of growth is an effect on the rate of inflation.

Monetary policy comprises those government action which are designed to influence the behavior of the monetary institution. Monetary policy work by the monetary authority affecting directly or indirectly the cost and availability of monetary credit in the financial market.

The financial system of any economy comprises of financial institution system of any economy and market that mobilize funds from simple’s economic unit and channel such fund to the defecator production, investment and generation of assets or securities in a process.

The bank from the largest units in this intermediation, the commercial bank according to R.P. Kart 1961 is an organization whose principal operation is concerned with the accumulation of temporary idle money of the public for the purpose advancing to others for profitable expenditure.

The commercial bank in their daily operation can perform liquidity transformation, create money and derived the bulk of their fund from the general public. This involves government monetary and legal reputation of banking activities.

Monetary regulation are often guided by the developmental objective of government but their effectiveness depend largely on the ability of the monetary authority to monitor closely the operation of the bank in the economy of the any country both developed and developing economics.

The automate objectives of monetary policies, however, are not the monetary aggregate themselves, but usually the aggregate in the real sector of the economy, such as the level of output employment price, the rate of economic growth and the balance of payment. Monetary policy is used to influence those ultimate objectives because there is a believe that a relationship exists between the real variables and the monetary variables.

1.2 Aims and Objectives

The study is intended to appraise the possible effect that various monetary policies in the country over the years have no banking industry (commercial banks). It is also aimed at assessing at the tract of monetary policy with reference to commercial banks performance. The reports is aimed at coming out with a result that will form the basis of solution and suggestion on how to improve on the present situation. The study also aimed at resolving make controversial in banking.

1.3 The Significance and Importance of the Study

A consideration of deregulation of monetary management and the inflation consequence brought into focus the essence of well coordinated financial system with mineral larges.

Given a background or virtual overall of monetary management. The banking sectors had to bear the burnt of policy rest rain and share significantly from gains of financial monetary policy administrations and a phenomenal change in bank ownership structure and size a study of this nature becomes opposite to bring out the factor responsible for such trend.

1.4 Statement of the Problem

There cannot be any successful research of this nature without recounting some difficulties which might cause its success or failure. However, the following are the major problems to be encountered during the cause of this project:

1. Difficulties in scolling some of the total document containing some valid information resulting to the subject matter, the non-availability and inadequate of data caused by the factor built some limitation into the study.
2. Lack of cooperation from some member of Staff of Mainstreet Bank; some of them were not ready to goes certain information. This led to the difficulties in securing some of the vital information relating to the research study.
3. Time factor also contributes to the difficulties because on several occasion it will demand you to share the time for thing for your project.
4. To cream everything up, the financial aspect also serves as a constraint because of limited available resources faced by parent who are to provide such needs.

1.5 Scope and Limitation of the Study

The scope of the study focuses on the following performance measurement in appraising commercial banks performance in Nigeria. These include banks profitability capitalization and liquidity. The study shall be limited to the impact of monetary policy in Nigeria along.

The study is limited to definitions and policy instruments, advantages, problem and solution. This is because on attempt to base the study on all the banks in the country will be too cumbersome, and the result will be beyond the scope of this project.

1.6 Research Methodology

Methodology and source of data is a system of getting useful information about the topic. Two methods of data collection are mainly used, they are the primary source and the secondary source.

1. Primary method of data will be employed in this study and the form of primary data is personal interview with bank official i.e. Mainstreet Bank Plc officials.
2. Secondary method of data collection will be used in carrying out the research work. This will include details, journals Nigeria stock quarterly, just to mention few.

1.7 Plan and Organization of the Study

• The chapter one of this project will enable the introductory note, aims and objectives of the study, methodology and chapterization.
• Chapter two will be based on literature review which states the view of mainly reports and writers on the subject matter.
• Chapter three will be based on data gathering and presentation procedure.
• Chapter four focuses on the presentation of various policy measures and their impact.
• Finally, chapter five will contain summary, conclusion and recommendations.

1.8 Definition of the Key Terms

Monetary Policy:

Is defined as a policy which employee central bank control over the supply and cost of money as in instrument for achieving the certain given objective of economic policy.

Commercial Bank:

Can be defined as an institution which accepts deposit makes business loan and offer related services.

Balance of Payment:

Can be defined as the record of all transaction made between one particular country and all other countries during a specified period of time.

Inflation:

Is defined as continuous rise of goods or commodity.

Economic Growing:

Is a steady grown in the productive capacity of the economy and so a growth to national income.

Central Bank of Nigeria:

Is the only financial institution established and charged with the day to day management and control of National Monetary Affairs and Supervision.

Moral Suasion:

This means by the monetary and thirties of friendly persuasive statement, public pronouncement or outright appeal.

Selective Credit Control:

This is a process whereby the monetary authorities tend to favour one sector of the economy than the other.

Interest Rate:

It can be used as an instrument to combat inflation, budget burden, promote capital inflow and discourage flights.

Special Deposits:

This technique may be employed if the prevailing economy donations do into favour the rise of other instruments.

Chapter Five

5.0 Summary, Conclusion and Recommendations

5.1 Summary

Based on the analysis carried out it is without doubt that the various monetary policy measures, instituted in the country over the years have directly or indirectly affected the performance of the banking sector. The analysis demonstrated that there is need and room for improvement in the banking sector and the formulating and implementation of monetary policy.

In summary the delegation of the banking industry has led to a number of improvements in the banking sector. The nominal savings mobilized by banks has been encouraging financial intermediation and access to loans has improved significantly which has also led to a positive increase in the number of banks.

Consequently, monies competition in the industry has been engaged resulting in the – emergence of a wide range of products. Indeed the era of armchair banking industry brought about by restraint put in place cause excessive inflation perceived by to be caused by banks excess liquidity resulted in some negative effect predominant among which was the loss of competitiveness to adopt various methods to circumvent the direct credit method control by window dressing statutory returns to monetary authority.

Further more the high cost of bank lending has further depend the investment and general business climate in the country, indeed it is a matter of general consensus fact the liquidity of banking services has not improved to the extent expected while fraudulent practice in the industry has been accentuated.

5.2 Conclusion

In conclusion, the plan shift to indirect control regime remained in abeyance as the close of.

However some development such as total deregulation of interest rate, removal of credit and approval in principles of some discount houses were positive signals towards the scheme.

The major constraints that prevent the full implementation of indirect control remained large by on resolved at the close of. Efforts were being made to resolve some of these problems. For example, the federal government had openly declared an infection to tight deficit financial houses have been regulated in list distressed institutions are to be globally restructured through the indirect control can be implemented without complete resolution of all the problems aforementioned, the gradualist move by the monetary authorities is to ensure successful implementation of the new method.

5.3 Recommendations

The following recommendations based on the findings of this study are therefore suggested.

Monetary policy should be made more flexible. This will allow for swift change of policy measures to suit existing situation.

Commercial and merchant bank should involve in a system adaptive to local condition by creating those of financial assets that is conductive for improve savings.

Secondary data by the central bank of Nigeria and Federal office of statistics should more available and up to date.
Finally, the government should create a conductive environment sufficient to encourage ultimate preference of the financial sector. This curing inflation and the level of consumption n. frequent practice in banks.

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Effect Of Monetary Policies In Nigeria Financial Institutions (A Case Study Of Union Bank Of Nigeria)

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