ABSTRACT
The goal of this study is to determine how macroeconomic policy variables affected Nigeria's banking sector's performance between 2000 and 2021. The study used the Auto-Regressive Distributed Lag technique to accomplish the stated goal. The seeming scarcity of empirical studies in this field is what spurred this. Bank lending rates, currency rates, inflation rates, total money supply, and economic growth are examples of macroeconomic variables. Root test, descriptive statistics, trend analysis, and ARDL Bound test were used to evaluate the study's data, which came from the World Bank data bank and the Central Bank of Nigeria (2021). The outcomes of the empirical analysis confirm that over time, the macroeconomic policy variables and the performance of the banking sector are cointegrated.
According to the ARL Cointegrating and long run estimations, the prime lending rate, the exchange rate, and economic growth had a statistically significant beneficial impact on the short- and long-term performance of the banking sector. However, both in the short and long term, the inflation rate has a statistically significant negative impact on the performance of the banking sector. Broad money supply, meantime, has a favorable and negligible impact on the short- and long-term performance of the banking sector. As a result, the study comes to the conclusion that the loan rate, the exchange rate, and economic development are the real macroeconomic policy drivers of the performance of the banking industry in Nigeria over the short and long terms.
Based on this, the report suggested that the Listed Deposit money banks look into ways to strengthen their internal capacity for managing foreign exchange risk. Last but not least, the Central Bank of Nigeria needs to put in place the necessary safeguards to protect the value of the local currency.
