Central Bank of Nigeria
Monetary policy, Interest rates, Standing facilities, Nigeria.
The paper investigates the pattern of pass-through effects of standing facilities rates on commercial bank retail interest rates in Nigeria. Monthly data spanning 2007:06 to 2019:12 and the Gregory-Hansen cointegration method that accounts for structural breaks are used in the empirical analysis. The adjustment parameters for the standing deposit and lending facilities are found to be significant, but with a low speed of adjustment. This provides some evidence on the nature of the interest rate channel of monetary policy transmission in the country. Furthermore, the study could not confirm asymmetry in the adjustment of retail rates to their long-run equilibria. Lastly, we find that when the cost of funds rises, following a hike of the upper bound of the policy rate corridor by the CBN, banks tend to cut costs by reducing interest expense rather than raising deposit interest rates to aggressively pursue deposit mobilisation.
CBN Economic and Financial Review
Eleam et al., (2021). Pass-through effects of standing facilities on Bank interest rates in Nigeria. Economic and Financial Review, 59(3), 1-25.