ABSTRACT

The study investigated the relationship between monetary policy and banking sector development in Nigeria for a period of 34 years (1986 to 2020). The rationale for the present study is predicated on the fact that monetary policy plays significant role in the determination of banking sector development in any country across the globe. The study employed the ordinary least square (OLS) econometric technique on variables such as deposit money bank total assets (DMBTA), monetary policy rate (MPR), money supply (M2), cash reserve ratio (CRR) and interest rate (INTR). The empirical results revealed that monetary policy rate does not have significant impact on banking sector development in Nigeria within the period of investigation. Money supply (M2) is the only variable that exert significant impact on the development of the Nigerian banking sector overtime. All the other variables (interest rate (INTR) and cash reserve ratio (CRR) failed the 5 percent significance level. By implication, these variables do not have any significant impact on the overall development of the Nigerian banking sector. The study recommends among others that the CBN should as a matter of public urgent importance to overhaul and redirect its current monetary policy instruments so that they will be able to enhance banks’ ability to grant more credit facilities to customers.