Ef The area of study o this research work is to determine the effect of monetary policy on the performance of banks in Nigeria. This study will cover all the commercial banks that have been in existence since 1975-2004. More so, the aggregates rate is used in assessing their performance.
3. 2METHOD OF INVESTIGATION/SOURCE OF INFORMATION According to Asika (2002), research work can be defined as the restructuring of investigation aimed at identifying variables and their relationship to one another.This is used for the purpose of obtaining data to enable the researcher test hypothesis or answer research questions. This study relies principally on secondary data. The sources of these data are publications of Central Bank of Nigeria (CBN) and The Federal Office of Statistics (FOS) such as annual reports, gazette, statement of accounts, economic and financial reviews and statistical bulletin. Empirical investigation is based on annual observations of commercial banks covering the period of 1975-2004. 3. 3SAMPLING PROCEDURE Using sampling procedure will not be appropriate in carrying out this research work.
In this review, the in-depth study of the operation of Central Bank of Nigeria would not require sampling procedure because it is the only body that has primary responsibility to maintain price stability and foster the implementation of monetary policy in Nigeria. 3. 4MEASUREMENT OF VARIABLES The variable research work includes the dependent and independent variables. The dependent variable of this project work is the monetary policy, which are thus: interest rate, exchange rate, banks reserve and liquidity ratio. The independent variable is the performance of banks in Nigeria, which is measured based on efficiency and asset sizes. . 5THE DATA COLLECTION The data sources are secondary sources of data.
The sources includes Central Bank of Nigeria Briefs, statistical bulletin, Economic and Financial review volumes, Federal Office of Statistics, Publications, Textbooks, and other journals of economics. 3. 6VALIDATION O RESEARCH INSTRUMENTS AND TESTING Validity is defined as the extent or degree to which a measuring instrument measures what it is designed to measures. Every measuring instrument is designed for a specific purpose. A measuring instrument is said to be valid if it enables the researcher to measure the correct responses from the sample subjects.Similarly, a measuring instrument is valid when the result elicited from it serves the purpose for which it is intended.
3. 7DATA ANALYSIS TECHNIQUE The data is analyzed using econometric techniques and descriptive statistical analysis. The values of Durbin-Watson Statistics will show the existence of serial correlation in some of the specification. 3.
7. 1MODEL SPECIICATION From the above discussions, the profit function of the commercial banking industry assumes the reduced form: P= ? (r, er, rv, cr, pl, w)………….. (1) Where; P- Banks’ performance measure (interest earnings as a ratio of total assets of commercial banks: return on assets, that is, ratio of gross profit to their total assets, and return on capital for the industry, that is, the ratio of gross profit to industry paid-up capital); * r- Interest rate (savings or lending and their spread); * er- Exchange rate is the price of one currency in terms of other currencies: It therefore denotes the numerical values of the domestic currency of the country at the given time in relations to those countries with which the country has trade links; * rv- Commercial banking system reserves; cr- Concentration ratio used to measure the influence of the three big banks in the industry, it is defined as the ratio of the assets of the three big banks to total sector assets; * pl- variable measuring efficiency, represented by the ratio of provision for loan losses to total loans and advances * w- unit labour costs (ratio of labour costs to number of employees).
The impacts of all bank sizes are taken into account.The influence of bank size on bank performance has been traditionally modeled by grouping banks based on asset sizes. Because of the short period of operation, most of the banks have separate time series analysis. Under this scheme, each group’s total profit rate becomes the independent variable. The influence can be inferred by comparing the regression summary statistics for the different groups.
CHAPTER FOUR PRESENTATION, ANALYSIS AND INTERPRETAION OF DATA 4. 1INTRODUCTIONThis section presents the estimates from the model as specified in the preceding chapter. The t-statistic is used to test the significance or insignificance based on certain degree of significance. Specifically, when t-tabulated (tt) is greater than t-calculated (tc), then there is no significance between the variables in the model.
F-statistic is used to test the significance of R2 statistics. It is adopted to test the goodness of fitness of the model in econometrics.The decision rule states that if F-calculated (fc) is greater than F-tabulated (ft), then there is high significant relationship among the variables under consideration are linearly significant and the variables in the model are good in explaining the variations in the model. Co-efficient of determination (R2) is used to measure the proportion of the variation in the dependent variable that is explained by the independent variables. If co-efficient of determination (R2) is greater than (50%), there exists a positive relationship between the dependent variable and the independent variables.If otherwise, there is a weak degree of association among the variables in the model. If the value of R2 is lesser than zero, that is negative, this suggests an inverse relationship between the dependent variable and the independent variables. Furthermore, the use of Durbin-Watson (DW) statistic is also employed in this analysis to detect the auto-correlation in the model.
That is, to show that there are two or more independent variables in the model that has the same influence on the dependent variable, but if the (DW) value is greater than 2. , there is absence of serial correlation. 4. 2GENERAL INFORMATION ON THE PERFORMANCE OF THE RESULT MODEL SPECIFICATION The profit function of the commercial banking industry assumes the following form: P=? (r, er, rv, cr, pl, w) Where; P-Bank performance r-Interest rates (savings and lending or their spread) er-Exchange rate rv-Commercial banking reserves (cash reserves) cr-Concentration ratio pl-total loans and advances w-Unit labour cost Equation 1: P = aC + a1r + a2er + a3rv + a4cr + a5pl + a6w + e C123465