Monetary Policy and Commercial Banks Performance in Nigeria: An Assessment of Credit Creation Role

Abstract

The study examined the impact of monetary policy on the commercial banks performance in Nigeria in terms of credit creation. Monetary policy instruments such as interest rate and money supply were used as proxy for monetary policy; other variables such as liquidity ratio and cash reserve ratio were also used. The estimating technique adopted was regression analysis. The results showed that credit creation powers of commercial banks are mostly affected by these four variables. Notwithstanding, money supply and cash reserve ratio appeared to have the most pronounced effect on credit creation power of the commercial banks.  It is recommended that a vibrant monetary policy that will be effective in controlling the credit creation power of the commercial banks in Nigeria requires the inclusion of these identified variables.