EFFECTS OF MONETARY POLICY INSTRUMENTS ON COMMERCIAL BANK’S LOANS AND ADVANCES IN NIGERIA (2000-2024)

Abstract

This study examined the effects of monetary policy instruments on commercial bank’s loans 
and advances in Nigeria (2000 – 2024). While the specific objectives were to: examine the 
effect of cash reserve/ liquidity ratios on loans and advances; to:  evaluate the effect of interest 
rate on loans and advances. The study employed the ex-post facto research design. In addition, 
it made use of secondary data obtained from the Central Bank of Nigeria statistical bulletin and 
Published Financial Statements of Deposit Money Banks.  The data obtained were analyzed 
using univariate, bivariate and multivariate analysis techniques. The results indicated that: cash 
reserve ratio, liquidity ratios, interest rate of commercial banks in Nigeria have negative 
significant effect on bank’s loans and advances. The implication of the study shows that 
monetary policy instrument contributes to increased quantity of loans and advances provided 
by commercial banks in Nigeria. The study concluded that monetary policy instruments 
influences the level of loans and advances of banks in Nigeria. And so, the study recommends 
among others that: Expansionary monetary policy should be adopted by the Central Bank of 
Nigeria (CBN) to force down interest rate and increase money supply because a fall in the bank 
rate will reduce interest on loans made by commercial banks. This will encourage more 
customers to secure loans from their banks thereby, increasing investment opportunities in the 
country ceteris paribus.