Impact of Monetary Policy on Deposit Money Bank Lending in Nigeria

This study investigated the impact of monetary policy on deposit money bank lending in Nigeria over the period 2005-2022. Data for the study were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin, 2023. The study employed an ex post facto research design, and data analysis was conducted using Error Correction Model with the Ordinary Least Squares (OLS) technique. The key findings of the study show that the monetary policy rate, cash reserve ratio, and liquidity ratio all have an inverse and insignificant relationship with commercial bank lending in Nigeria. However, Open Market Operations (OMO) was found to have a positive and significant relationship with commercial bank lending. The study concluded that traditional monetary policy tools may not have been effective in influencing lending behavior in Nigeria during the study period. It recommends that the central bank should consider providing short-term funding options or facilitating interbank lending to help banks manage liquidity better while continuing to support lending activities.