Abstract:

Monetary policy is one of the most critical tools used by central banks around the world to regulate economic activity and achieve macroeconomic stability. Despite the Central Bank of Nigeria's (CBN) sustained efforts to regulate the economy through monetary policy, the impact of these policies on commercial bank lending has been inconsistent and, at times, ineffective. This study examined the impact of monetary policy on commercial bank lending in Nigeria covering the period 2005-2022. Data for the study were extracted from the Central Bank of Nigeria (CBN) Statistical Bulletin, 2023. The expo-facto research design was adopted in the study. The multiple linear regression with the application of Ordinary Least Squares (OLS) technique was adopted as the method of data analysis. The major findings of the study reveal that monetary policy rate has an inverse and insignificant relationship with commercial bank lending in Nigeria, cash reserve ratio has an inverse and insignificant relationship with commercial bank lending in Nigeria, liquidity ratio has an inverse and insignificant relationship with commercial bank lending in Nigeria and Open Market Operation (OMO) has a positive and significant relationship with commercial bank lending in Nigeria. The study therefore concludes that traditional monetary policy tools may not effectively influence lending behavior in Nigeria during the study period. It is therefore the recommendation of the study that the central bank could also facilitate access to short-term funding mechanisms or interbank lending to improve banks' ability to manage liquidity effectively while still supporting lending activities.