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ABSTRACT
Over the course of 27 years (1995 to 2021), this study looked at how monetary policy affected the development of the banking sector in Nigeria. The current research was inspired by the recognition that monetary policy is a major factor in determining the growth of the banking sector in every country. In addition, the government's macroeconomic goals can be accomplished through the implementation of monetary policy, which is the Central Bank's specific action of controlling the value, supply, and cost of money in the economy. This means that the empirical results of the ordinary least square (OLS) econometric technique applied to variables such as the return on assets (ROA) of deposit money banks, the monetary policy rate (MPR), the money supply (M2), the interest rate (INTR), the exchange rate (EXRT), the cash reserve ratio (CRR), and the inflation rate (INFR) for the period under study do not support the hypothesis that MPR significantly affects banking sector development in Nigeria. Instead, the development of the Nigerian banking sector was significantly influenced by only one monetary policy instrument over time: the money supply (M2). Our research leads us to the conclusion that Nigeria's Central Bank (CBN), specifically its monetary policy committee, needs to improve its ability to react to the dynamic macroeconomic shocks that impact the banking system and the economy as a whole. To put it another way, a strong economy necessitates a strong and healthy banking sector.
