Abstract

The study examines the effect of monetary policy on banking sector stability in Nigeria between 2008 to 2023. Using Ex post facto research design, quarterly time series data were extracted from the Central Bank of Nigeria's statistical bulletin 2023 and ARDL estimation was used based on the unit root test result. The dependent variable banking sector stability was proxied by Z-score, while the independent Variable, monetary policy was proxied by monetary policy rate and treasury bills. The walt test showed that monetary policy rate had negative significant effect on banking sector stability in Nigeria, while treasury bills had a positive significant effect on banking sector stability in Nigeria. Therefore, the study recommends that the CBN should maintain the 26.25% central bank rate, this will equally attract more foreign investments in the money market as this will translate to bank performance and stability. The monetary authority should enhance its use of the open market operations to help regulate the level of liquidity in the banking system. The use of open market operation will help stem the tide of excess liquidity that will bring about stability in the banking sector in Nigeria.