INTEREST RATE DEREGULATION AND THE PERFORMANCE OF THE DEPOSIT MONEY BANKSIN NIGERIA
DOI:
https://doi.org/10.60787/aasd.vol4no1.115Abstract
Before the deregulation of interest rates in Nigeria, the interest rate was strictly controlled by the Central bank of Nigeria (CBN). It was later ealized that strictly regulated interest rate strategy could not sustain banks’ productivity in the country. This study seeks to empirically examine the effect of interest rate deregulation on the performance of commercial banks between 1986 and 2025 using theerror correction model regression technique. The study employed data from the Central bank of Nigeria and World development indicators. The findings reveal that cash reserve ratio and nflation rate have negative relationship on banks’ performance while interest rate had a statistically significant relationship on banks’ performance proxied by Return on Assets. The study recommends, among others that the Central bank of Nigeria should adopt a balanced monetary policy that ensuresmoderate interest rate while avoiding excessive high cash reserve ratio, in order to ensure productivity and promote economic growth. The study concludes that interest rate deregulation plays a significant role in influencing the performance of banks in Nigeria and that effective monetary policy management is essential for sustaining banking sector stability.
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