MONETARY POLICY TRANSMISSION CHANNELS AND BANKING SECTOR DEVELOPMENT IN NIGERIA

O. F. ETUDAIYE-MUHTAR; L. OYINLOYE; K. D KOLAWOLE

O. F. ETUDAIYE-MUHTAR Department of Finance, University of Ilorin, Ilorin, Nigeria.
L. OYINLOYE Department of Finance, University of Ilorin, Ilorin, Nigeria.
K. D KOLAWOLE Department of Finance, University of Ilorin, Ilorin, Nigeria.

Keywords: Banking Sector Development, Equity Price, Exchange Rate, Interest Rate, Monetary Policy

Abstract

An inappropriate monetary policy transmission channel impedes the intermediary role of the banking sector in an economy which may inadvertently affect the sector’s development. This study, therefore, examines the effect of interest rate, exchange rate, and equity price transmission channels on banking sector development in Nigeria. The autoregressive distributive lag technique is used on annual time series data obtained from World Bank Development Indicators and the Central Bank of Nigeria Statistical Bulletin for the period 1986 to 2019. The findings show that interest rate and exchange rate channels have positive and significant effects on banking sector development in the short and long run, while equity price channel has no significant effect on banking sector development. Based on the findings and given the importance of banks in bank-based economies like Nigeria, it is important that monetary authorities utilise interest rate and exchange rate channels, to promote banking sector development as well as to achieve desired monetary policy objectives.

Author Biographies

O. F. ETUDAIYE-MUHTAR, Department of Finance, University of Ilorin, Ilorin, Nigeria.

L. OYINLOYE, Department of Finance, University of Ilorin, Ilorin, Nigeria.

K. D KOLAWOLE, Department of Finance, University of Ilorin, Ilorin, Nigeria.