Monetary Policy and Nigerian Banking Sector Performance: Evidence from Some Stylized Facts

Abstract

 Most of the existing papers in Nigeria that address links between monetary policy management and banking sector performance used various econometrics and inferential statistical measures, with little or no concern for readers that are not quantitatively biased. Therefore, this paper characterized the trajectory paths of the dynamics of the performances of key monetary policy tools and banking sector performance indicators spanning 1985-2011. We found that despite the various financial sector reforms in Nigeria at the wake of global financial crisis, which has led to increase in the trends of some of these indicators, the widespread in the interest rate margin (high lending rates given by banks to investors and low deposit rates given to the depositors) has decelerate the pace of financial development and lower pace of economic growth as a result of lack of incentives to depositors, hence, their preference for other informal savings arrangements. Strengthening the monetary authority in Nigeria will therefore help in addressing these anomalies.