Effect of monetary policy instruments on commercial banks rural financing in Nigeria

Abstract

The level of Nigerian Commercial Banks Credit availability to Rural Customers with the influence of Monetary Policy Instruments motivated this study. The study examined the relationship between Monetary Policy Instruments and Rural Financing by Commercial Banks in Nigeria. The main objective of this study is to investigate the effect of Monetary Policy Instruments on Commercial Banks Rural Loans. Regression analysis was used to analyze the data collected. Data were sourced from the Central Bank of Nigerian Statistical Bulletin. Findings revealed that the correlation coefficient was positively correlated. Findings also revealed that there is no significant relationship between Monetary Policy Instruments and Commercial Banks Rural Loans. The study concluded that the availability of credit to rural bank customers was affected by monetary policy instruments during the analysis period. The study therefore recommends that Commercial banks’ lending rate should be reduced in order for investors to see commercial banks as number one source of finance, Central Bank of Nigeria should increase the minimum reserve of Commercial banks in order to facilitate an adequate credit to commercial banks customers/ investors, Commercial banks should promote a higher level of liquidity to increase their ability to cover withdrawals from their clients and to increase loans and advances to clients.